Saturday, 23 April 2022

MANGUDYA : FOREX AUCTION TO STAY

THE Reserve Bank of Zimbabwe has given assurances that the foreign currency auction system will remain in place and insisted the apex bank “has no reason or appetite to raid (foreign currency) accounts” as was being alleged by industry lobby group, the Confederation of Zimbabwe Industries.

In a paper on Friday, CZI had proposed that the RBZ should pull the plug on the auction system after parallel market rates spiked to levels of around $350 to the United States dollar last week.

“The foreign exchange auction system remains in place and will not be suspended as doing so will cause shortages of goods in the market and abet inflation. All foreign exchange accounts are safe and the bank has no reason or appetite to raid the accounts,” RBZ Governor Dr John Mangudya said in a statement yesterday.

The central bank said issues raised by the industry representative group were unhelpfully speculative and baseless.

“The Reserve Bank of Zimbabwe (the Bank) wishes to draw the public’s attention to the fact that the contents of the CZI paper are a response to rumours and not based on facts on the ground. The contents of the CZI paper and the impressions depicted therein are unfortunate and uncalled for as they have the potential of destabilising financial markets and economic stability of the country,” he said.

Government and the RBZ, he added, are committed “to an orderly de-dollarisation process and hence it is false that a mono-currency system is now in place”.

In its paper, the CZI proposed what it termed “a true liberalisation of the foreign exchange market where banks act as match-makers linking buyers and sellers of foreign currency”.

Speaking to The Sunday Mail yesterday, economist and RBZ Monetary Policy Committee member Mr Persistence Gwanyanya said the local economy was far too concentrated for full currency liberalisation to be effective.

“The challenge with our economy is that foreign currency is concentrated in the hands of a few. Note, for example, that of the US$9,7 billion foreign currency receipts that were injected into the economy last year, US$6 billion was from exports. And, of those exports, around 85 percent are accounted for by a few commodities such as gold, diamond, platinum and chrome.

“Hence full liberalisation cannot be an effective price-discovery system. Why would companies like Mimosa or Zimplats, for instance, sell forex when they are also sitting on Zimbabwe dollar balances?”

Economist Mr Eddie Cross said it is important to boost market confidence in the Zimbabwe dollar.

“The reason for the run in the parallel market rate is simply lack of confidence in the currency itself and also desire to hold US dollars rather than the local currency,” he said.

During a recent engagement with insurance sector players, Finance and Economic Development Minister Professor Mthuli Ncube said Government is keeping a close eye on factors that may negatively impact the local currency.

“The fundamentals for a strong currency are in place. The value of a currency will respond to the size of a budget deficit. I made it clear I don’t preside over deficits; I only balance the budget.

“Second is the issue of the monetary targeting regime. We target M0 (M-zero) money, the growth in reserve money; currently, our target is 7,5 percent per quarter. So, we are on target and we will keep reducing,” he said.

Earlier last week, Professor Ncube announced that 50 percent of vehicle import duty will now be paid in local currency at the prevailing official auction rate, underlining the importance of trading in the local currency. Sunday Mail

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