RESERVE Bank of Zimbabwe governor John Mangudya says the foreign currency auction system indicated that the central bank has managed to clear 91% of the forex demand as at 31 December 2022.
In a Monetary Policy Statement released on 2 February 2023, Mangudya said the auction disbursed close to US$4 billion during this period.
“In 2022, a total amount of US$1.1 billion was allotted on the foreign exchange auction, representing 91% of the total bids submitted. Since the introduction of the auction system, cumulative allotments amounted to US$3.7 billion as at 31 December 2022,” he said.
He added that there was a significant increase in foreign currency demand from small to medium enterprises during this period as compared to the corresponding period in 2021.
“The share of the MSMEs sector continued to increase from 17% during the first half of 2022 to 22% in the second half of 2022,” said Mangudya.
The foreign exchange auction system was introduced in 2020 to assist importers with forex.
Mangudya adds that this initiative helped stabilise hyper-inflationary foreign exchange rate.
“Foreign currency auction system remained a key source of foreign currency for the economy, fostering stability in both the foreign exchange and goods markets. The foreign exchange market was generally stable during the second half of 2022, as reflected by stability in the goods market.”
He added that the forex auction coupled with the introduction of gold coins had helped arrest market volatility.
“The combination of tight monetary policy through high policy rates and the liquidity-mopping effects of the gold coins and the foreign exchange auction system played a pivotal role in achieving price and exchange rate stability in the economy.”
“The Bank introduced gold coins in July 2022 as both an alternative retail investment product for value preservation in the dual currency system and a liquidity mopping instrument over and above the foreign exchange auction system. The gold coins have been well received with 25 188 coins valued at ZW$20 billion having been sold as at 13 January 2023. The bulk of gold coins, 84% were bought by corporates while purchases by individuals accounted for 16%.”
“To enhance confidence in the foreign exchange market and meet the requirements of users of foreign exchange, the Bank cleared all allotment backlogs and is now current with allotments. Going forward, the Bank will ensure that allotted funds are settled within 14 days from the date of the auction as per the Foreign Exchange Auction Rules,” Mangudya said.