Individuals now eligible on govt forex auction access
By Wellington Zimbowa
INDIVIDUALS can now access forex on the government forex auction, the Reserve Bank of Zimbabwe (RBZ) has said.
But this move which seeks to promote financial inclusion will be based on individual identities with a weekly cap of US$50 per person, the latest monetary policy review by the central bank’s monetary policy committee (MPC) 27 August 2021 update revealed.
Zimbabwe’s two decades long-suppressed macro-economic activity – spelt by low industry production and negative country balance sheet – with local forex supply becoming dire, especially for the productive sector that relies on hard currency for raw material imports among other needs forcing authorities to unveil the official forex supply that has controlled exchange ratios.
“Further liberalising the operations of bureaux de change to promote financial inclusion by allowing them to process small value foreign currency transactions of up to US$50 per person, per week, on the basis of individual identities, with charges and commissions levied by the bureaux de change not exceeding 10% per transaction,” read the update.
On the official forex exchange, the United States Dollar is weighed (US$) 1:85 (ZWD) against the black market’s (US$) 1: 150 (ZWD), with authorities, thereby, blaming the black market for spiralling inflation.
However, a number of individuals have been in need of the hard currency for basics such as medication, school fees and other key accessories available locally or outside the country, especially when the use of multi-currency in products and services sales allowed locally, but with given regulations.
The MPC meets regularly to deliberate on recent economic and financial developments and their implications on monetary policy.
In this last meeting, the committee was positive on the current monetary economic situation and its impact on combating inflation and fostering monetary stability in the economy, vowing to continue on the said positive trajectory.
“The Committee noted with satisfaction the strong economic growth, which is envisaged to be strengthened by the favourable global economic outlook and the US$961million SDR allocation from the International Monetary Fund (IMF), on 23 August 2021,” said the update.
Accordingly, foreign currency receipts increased by 32% to US$5.09 billion as of 7 August 2021, compared to US$3.85 billion received during the same period in 2020.
In particular, the Committee welcomed the impressive performance of foreign currency receipts, which increased by 32% to US$5.09 billion, as of 7 August 2021, compared to US$3.85 billion received during the same period in 2020.
On the other hand, cumulative foreign exchange payments increased by 42% to US$3.59 billion as of 7th August 2021, compared to US$2.52 billion for the same period in 2020. The significant increase in foreign currency receipts is critical for sustaining the foreign exchange market and fostering exchange rate stability.
Against this background, the MPC emphasised the need for staying the course of the current monetary policy stance saying this has proven effective in combating inflation, while fostering monetary stability in the economy.
Year-on-year inflation dropped from 837.5% in July 2020 to 50.2% in August 2021, according to the apex bank.
Subsequently, to support the noted positive trajectory, a number of resolutions were made.
These include maintaining the 40% annum bank policy rate, 30% Medium Term Bank Accommodation Facility.
Reserve money target also remains at 20% in a bid to achieve a lower level of monetary expansion by year-end based on inflation and other macroeconomic developments influences.
RBZ also highlighted it would upkeep its recent Mid-Term Monetary Policy Statement in towards expunging the foreign exchange allotment backlog of around US$175 million, with the MPC stressing the need to clear the backlog in a month’s time to ensure sustainability of the auction system inline within necessary guidelines.