eBusiness Weekly
Tapiwanashe Mangwiro
The Reserve Bank of Zimbabwe (RBZ), recently amended the Foreign Currency Auction rules, as it instructed bidders to submit offers four working days before the auction as a way to give them time to sift through the bids.
Since the change of bidding rules, rejected bids have been hitting new three month highs in the past three weeks.
The number of bids rejected at this week’s auction was 586 representing a 49,87 percent increase from last week’s 391 rejected bids.
Banks have been required to submit bids received to the RBZ within three working days, and any bids not supplied within that time frame will be disqualified.
It was changed to take care of bidders who have been taking advantage of the weak auction rules and banking systems in the country. RBZ now sees this as the opportunity to ascertain authenticity of the bids on time and allot to deserving companies.
The RBZ foreign currency auction system has been experiencing a lot of backlogs of foreign currency allotments which were initially attributed to malpractices by certain entities that were sponsoring multiple bids under the auction system. As of August 30, 2021, the RBZ said the backlog was US$175 million and vowed to clear it by the end of September.
Recently, the Government released US$200 million to clear the ring-fenced backlog and speed up the disbursement of funding.
This comes after the RBZ had to expunge another backlog with Treasury releasing US$70 million for the exercise in August and the RBZ governor, Dr John Mangudya highlighting that all auction allotments would be paid within two weeks from the auction date.
This has led some analysts to believe that the RBZ is using the strategy to reject bids as a way to limit allotments.
However, the Zimbabwean dollar strengthened to $105,6684 against the US$ in the latest foreign exchange auction. Although the change was marginal, this breaks the 11-week consecutive trend of local currency losing value as the parallel market nears $200,00 per dollar.
This week’s exchange rate is from a prior week’s rate of US$1: $105,6965, representing a marginal 0,03 percent change.
The total number of bids accepted for both the SME and main action stood at 601 and 379 from 693 and 420 accepted last week respectively.
The lowest rate allotted was changed at $99,9300 for US$1 after climbing from $99,0000 per US$1 a week ago.
The Reserve Bank of Zimbabwe has allotted a total of US$2,12 billion on the foreign exchange auction system from its introduction in June last year to September 2021 with the bulk of it tuned towards raw materials for both the SME and main auction.
The auction system remains the most diversified source of foreign exchange with more than 5,958 entities having accessed foreign currency through the Main Auction and the SMEs Auction.
