THE local dollar lost its grip against the United States dollar at the Reserve Bank of Zimbabwe (RBZ)’s auction system, which resumed on Tuesday with the official exchange rate now pegged at US$1: $705.

When the auction system closed in mid-December for the festive holiday season, the official exchange rate was pegged at US$1: $671.4. 

While the willing-buyer willing-seller market had continued operating throughout the holiday period to cater for importing businesses, the parallel market had started gaining traction riding on the absence of the official auction system.

The willing buyer willing seller system came into effect in May last year as one of the measures by the Government to arrest inflation.

The measure has been commended by the business community as it has stabilised the exchange rate by mopping up the excess liquidity, which  has created demand for the local currency.

In a trading update, the central bank said after this week’s auction, a total of US$10,019 million was allotted on the main auction and US$786,879 on the SMEs one.  

This brings to US$10,806 million the sum that was alloted. At this week’s auction, the main auction accepted bids worth US$13,142 million while the SMEs platform accepted US$1.001 million.

A total of US$6,210 million went to the procurement of raw materials and US$1.016 million was channelled towards the procurement of machinery and equipment in the main auction.

In the SME auction, US$275,169 went towards raw materials and US$213,566 million was for machinery and equipment procurement.

At the last trade in December, RBZ allotted a grand total of US$15,5 million to the auction system with US$14 million being allotted to the main auction and US$1,5 allocated to small and medium enterprises.

The introduction of the foreign currency auction system, consolidation of monetary policy reforms, and fiscal incentives, are some of the interventions that have aided industry recovery despite the disruptive impact of Covid-19 in the last two years. — Chronicle

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