RBZ moves to clear forex auction backlog

Efforts to clear the backlog of foreign currency auction allotments are underway, with Reserve Bank of Zimbabwe Governor Dr John Mangudya saying all auction allotments would be paid within two weeks from the auction date, and in particular, the auction bids from a fortnight ago being paid by today.

Economic analysts expect black-market rates, which have been rising in recent weeks, to tumble once the Reserve Bank has cleared the backlog.

It could not be immediately established how large the backlog was and how long bidders have been waiting, but on August 30, the RBZ said the backlog was US$175 million, and vowed to clear it by the end of September.

While Dr Mangudya could not be reached for comment as his mobile phone was unreachable, sources said about US$140 million had been cleared recently from that backlog.

In the last two weeks alone, the total foreign currency sold during auctions was about US$80 million.

In a statement last night, Dr Mangudya said: “The Bank wishes to advise the public that it is on course to clear the backlog of foreign exchange auction allotments, in line with the Monetary Policy Committee resolutions.

“The remaining backlog, which is also attributable to malpractices by certain entities that were sponsoring multiple bids under the auction system, is substantially in respect of foreign exchange allotments to secondary users of foreign exchange under the main auction.

“All allotments under the SMEs Auction are up to date.
“Going forward, all auction allotments will be paid within two weeks from the auction date.”

Dr Mangudya said in line with the plan to clear allotments in two weeks, the main auction allotments for the auction done on September 21, would be fully paid by today.

He added that the RBZ has ring-fenced the auction allotments backlog, which it will continue to expunge separately from current allotments.

And in order to further tighten money supply in view of recent developments on inflation, Dr Mangudya said the Reserve Bank introduced special exchange rate-linked corporate open market operations bills for the purposes of directly dealing with the growth of money supply in the economy.

“These bills will be targeted at corporates with huge local currency balances or those receiving huge payments in local currency, as some of these funds are being used to destabilise the foreign exchange market.

“This measure is to support the stability of the foreign exchange market, in line with the MPC resolutions of August 27, 2021,” said Dr Mangudya.

Economist Mr Persistence Gwanyanya told The Herald that the desire by the RBZ to clear the forex backlog was important for credibility.

“The recognition to clear the backlog is good in my view as it addresses perception issues, which have been promoting the rise in the parallel market rates.”

The black market selling rate, what dealers charge for US dollars, reached as high as $175, although buying rates, what holders of currency get from the same dealers, remained more stable.

It is also expected that the black-market rates will considerably tumble when Zimbabwe starts channelling the foreign currency component of the US$961 million Special Drawing Rights (SDRs) to the productive sectors of the economy as it starts to use the injection to support a number of budget initiatives that shelter Zimbabweans from the worst economic effects of the lockdown.-The Herald