Forex currency allotments at auction reach record US$32m

Source: Forex currency allotments at auction reach record US$32m | Herald (Business)

Dr Mangudya

Business Reporter

Foreign currency allotments at yesterday’s auctions reached a record US$32,95 million, with both the main auction and the SME auction setting new allotment records in their sector, while the Zimbabwe dollar remained stable, easing a marginal 0,12 percent to trade at $81,81 to the US dollar.

Despite the minute weekly easing of the local unit in recent weeks following a couple of months of equally minute strengthening, bids for the Zimbabwe dollar remain in a tight range and the currency is still stronger than the height of $83,39 set at the end of August 25.

The Reserve Bank of Zimbabwe (RBZ) has been allocating all valid bids in full in recent months, having adequate funds for sale and with no bidders going low enough to spark a rejection on their price falling below the market bulge in pricing.

Along with the general trend of rising amounts bid for and allocated, there has been a rising number of companies coming into the auction to source their requirements with total bids across both the main and the SMEs platform yesterday reaching 470.

Observers believe that the number of bids will rise further.

With regards to total foreign currency allocation yesterday, the main auction accounted for the bulk of allocations at US$30,6 million, and the SMEs segment accounted for US$2,32 million.

Central bank governor Dr John Mangudya has said more needed to be done to mobilise foreign currency for the auction system.

“We need banks, Government and ourselves to be able to mobilise lines of credit to ensure that we sustain the auction system.

“We also need to broaden and deepen the mobilisation of foreign exchange receipts through exports, through Diaspora remittances and any other flows, as this is critical to maintaining the prevailing exchange rate stability,” he said recently.

Improved forex availability on the auction platform will foster greater participation on the platform as some players are still directing dealing with their banks, although using the prevailing official rate.

And besides growing the ‘auction cake’, so to speak, the monetary and fiscal authorities are focused on ensuring that the macro-economic environment remains conducive.

Dr Mangudya said the auction system is not operating in isolation. “The RBZ’s current monetary policy is based on three pillars, namely: price stability, exchange rate stability and financial stability,” he said.

Latest money supply numbers are indicative of this broad approach where the taps on money supply creation remain turned off since the Government is working within budget and revenue actually collected, the RBZ is managing the liquidity available, and the importers themselves are setting the rate by matching their liquidity with forex availability.

According to the central bank, reserve money for the week to November 13, 2020 declined again by $767,47 million, to $15,19 billion, largely reflecting a decrease of $812,62 million in banks’ liquidity at the Reserve Bank.

Partially offsetting the fall in banks’ liquidity were increases in statutory reserves of $30,41 million and issued currency, that is banknotes, of $14,72 million.

Since the auctions are for the productive sectors seeking payment for goods and services on the priority system, there can be no sudden pressures caused by consumption demand as the festive season approaches.

Meanwhile, on the main auction, the total number of bidders was slightly down to 289 from 294 last week, and 268 bids from the big corporates were successfully allotted a total of US$30, 6 million. Unsuccessful bidders have paperwork problems rather than anything significant, with the RBZ insisting that paperwork for previous exports and imports is cleared by deadline, that nostro accounts are used before more currency is bid for, and that all goods and services backing the bid are on the priority lists.

The highest bid on the main auction declined to $88,3 from $90, while the lowest accepted bid remained on $80. And on the SMEs auction, the highest bid remained at $86, while the lowest successful bid returned to $80.

Total bids on the SMEs board were also lower at 181 from 192 in the previous week high of 152, although just 15 bidders were unsuccessful.

As per trend, the raw materials segment accounted for the bulk of allotments yesterday at US$13,38 million on the main auction and US$627 543 on the SMEs section.

Machinery and equipment came in second with US$6,15 million on the main and US$488 162 on the SMEs section.

And consumables came in third on the main auction at US$2,65 million; but on the SMEs section, consumables took up US$437 479.