The Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system has alloted US$833 million to date.

The apex bank yesterday said US$795 million had been allotted as at February 9. Adding this week’ s US$38 million, the latest figures top US$833 million.

“An amount of US$795 million had been allotted as at 9 February 2021
since the introduction of the foreign exchange auction system.

“A significant proportion of the total amount allotted has been earmarked for strategic sectors for imports of essential goods, especially raw materials, equipment, pharmaceuticals, chemicals, fuel and electricity,” said central bank governor Dr John Mangudya in the latest Monetary Policy Statement.

“To date, more than 70 percent of total foreign currency allotted has gone towards import of raw materials, machinery and equipment while other essential and strategic imports, including pharmaceuticals and chemicals, fuel and electricity have taken around 11 percent of the total allotments.”

The foreign currency auction system, which was introduced last June, has assisted in the discovery of an
appropriate and stable market-based exchange rate for the country.

The current foreign currency exchange rate is 83.75 to the United States dollar dollar, compared to a parallel market rate of around 120.

Dr Mangudya said the authorities are happy with the curb on the parallel market rate run.

“Whilst more still needs to be done in this area, the evident stability of the exchange rate, following the introduction of the foreign exchange auction system on 23 June 2020, has minimised distortions in pricing by curtailing speculative pricing and parallel market exchange rate indexation of prices by businesses,” he said.

“Consequently, the parallel exchange rate premium has reduced to a tolerable band of up to 20 percent, consistent with experiences in other countries. In addition, the establishment of an appropriate market-based exchange rate system has assisted in dampening pressures on inflation.