Senior Business Reporter
The Zimbabwe dollar eased by a marginal 0,39 percent against the US dollar in yesterday’s Reserve Bank of Zimbabwe (RBZ) foreign currency auction, with the exchange rate for US$1 shifting to $81,67 from $81,35 the previous week.
But the movement, while the largest weekly shift for seven weeks, was still trivial, stressing the continued confidence of bidders in the stabilising effect of the forex auction system, coupled with confidence that Government is tightening its own impressive levels of fiscal discipline, with farm input schemes this year for example run by banks under banking rules.
Observers project that the auction-determined official foreign currency exchange rate will move very slightly up and down each week until year end with none of the economic fundamentals changing.
“The exchange rate has stabilised at around $1:$80 to the US dollar, and we don’t see the rate moving significantly from that level,” said economic analyst Mr Persistence Gwanyanya.
“Normally, the fear is that during this period agriculture funding would impel money supply, but that funding is now done through banks. We have seen fiscal prudence from Treasury, and that tightness is likely to persist in 2021.”
Although there have been concerns over increases in utility services charges such as water charges and power tariffs over the past two months, Mr Gwanyanya said the tariff adjustment was actually a “necessary price re-alignment.”
These increases were not made when the private sector was showing up prices in the first six months and were now inevitable.
Yesterday’s auction saw total bids on the main auction declining to 260, from last week’s record high of 274.
A total of 234 bids from the big corporates were successfully allotted a total of US$26,51 million.
The highest bid on the main auction rose to $90 from $89 previously, while the lowest accepted bid remained on $80.
And on the SMEs auction, the highest bid remained at $86, although the lowest successful bid was slightly lower at $79, from $79,9 last week.
Total bids on the SMEs board increased from 146 to 148, although nine bidders were unsuccessful.
Total foreign currency allocation was higher at US$28,29 million from US$27,8 million, with the main auction accounting for US$26,51 million. SMEs took up US$1,77 million, up from US$1,67 million in the last auction.
Total forex allocations on the auction platform could be higher, if banks were participating, but they have chosen to remain on the sidelines although some are now reportedly dealing in currency fixed auction rate.
Economist and advisor to the central bank, Mr Eddie Cross said perhaps banks find better incentives in trading outside the RBZ auction, although still using the official rate.
“At this present time we don’t see banks coming to the auction,” he said.
“Whether this is a decision of the banks themselves or their clients, we don’t know for now. We would like them to participate. But look at it this way, if they liquidate their forex on the auction they get a commission of around 1,5 percent, but if they liquidate it privately they can get up to five percent commission; so there are numerous interests that could be at play here.”
As per policy, the productive sectors continue to be the biggest beneficiaries of the foreign currency auction system.
The raw materials segment accounted for the bulk of the allotments yesterday, with US$12 million on the main auction and US$455 965 on the SMEs board.
Machinery and equipment came in second with US$4,38 million on the main and US$410 717 on the SMEs section.
And consumables came in third on the main auction at US$2,38 million, while on the SMEs section they took up US$338 687.