Official exchange rate jumps to US$1: ZWL$3 675

THE official exchange rate jumped to ZWL$3 673 yesterday against the United States dollar, shedding 42,6 percent points when compared to the last week’s rate of US$1: ZWL$2 577.

Economists have for a long time recommended that the Government liberalises the exchange rate to curb speculative behaviour on the parallel market, which has tended to cause price distortion.

It is hoped that the widening of the formal exchange rate would narrow the disparity with the parallel market rate and that this, aided by tight controls on the money supply, would somehow stabilise inflation and restore consumer purchasing power.

The fine-tuning of the forex auction system is part of a string of new policy measures recently introduced by the Government to stabilise the economy and protect consumers from price madness.

The Government has committed to full implementation of the Dutch Auction System (timely payment, notification of funds available in advance and selecting the highest bidder), so as to improve transparency and efficiency in the trading of forex in the economy.

When the Reserve Bank of Zimbabwe (RBZ) auction system was introduced in June 2020, it was expected to act as a foreign currency price discovery mechanism that would eliminate the parallel market. The weekly auction will now be limited to US$5 million.

In an update following the weekly auction, the Reserve Bank of Zimbabwe (RBZ) said US$4,99 million was allotted to businesses with US$4,2 million on the main auction while US$829 418 was allotted to the Small to Medium Enterprises (SMEs) auction.

RTGS and USD money

The main auction received 215 bids and 210 were accepted while the allotted bids were 38. The SMEs platform received 304 bids, accepted 298 and allotted 82 bids.

As has been the tradition, regardless of the amount allotted, the bulk of the foreign currency continues to be channelled toward the procurement of raw materials, machinery and equipment.

At this week’s auction, US$2,3 million was allotted towards procurement of raw materials and US$254 261 was allotted to machinery and equipment by the main auction.

The SMEs platform was allotted US$345 922 towards procurement of raw materials while US$260 143 was allotted to machinery and equipment. — -ebusinessweekly