Harare, (New Ziana) – Zimbabwe’s currency, the dollar, devalued by more than half to $57.36 to the United States dollar on Tuesday after the government allowed it to freely float.
Until now, the government had pegged the local currency at $25 to the greenback, a rate exporters bitterly complained was unsustainably low.
The new exchange rate comes after the Reserve Bank of Zimbabwe (RBZ) aanounced last week it would dump the fixed rate, in use since last year, in favour of the auction system in which the weighted average from bidders and sellers becomes the ruling exchange rate for the week.
The auctions will be held every Tuesday.
The new official exchange rate however remains way below the parallel market rate which is running at between $80 and $95 per greenback depending on the method of payment.
Results of the first auction conducted by the RBZ show that the highest rate to the greenback on offer was $100 while the lowest was $25.5.
Total bids amounted to $11.4 million while the total amount that was allotted is $10.345 million.
At least half of the allotted amount will go towards the import of raw materials, machinery and equipment.
The remainder goes towards fuel, electricity, gas, chemicals, medicals and other consumables.
The RBZ said last week the new system “is expected to bring transparency and efficiency in the trading of foreign currency in the economy.”
Allocation of the scarce foreign currency is however based on the country’s import priority list.
Those wishing to buy hard currency on the auction are expected to present one bid per auction of a minimum of US$50 000 and maximum of US$500 000.
Analysts have however noted that the existence of the import priority list will still mean the parallel market will continue to thrive as those not on the list will hunt for the foreign currency elsewhere.
Adoption of the new system, in place of a fixed rate, has been hailed as a step in the right direction in terms of bringing sanity in the markets.
There have been calls for total independence of the auction system to ensure that the exchange rate reflects the true value of local currency.
New Ziana
