Senior Business Reporter
Naming, shaming and imposing heavy penalties against entities caught abusing funds obtained from the auction will reinforce the platform’s role as the preferred mechanism of distributing scarce forex in the country, analysts say.
As well as meting out heavy penalties against those caught abusing the auction system, the Reserve Bank of Zimbabwe (RBZ) has to date named and shamed a total of 39 errant beneficiaries of the auction system.
In terms of Statutory Instrument (SI) 127 of 2020, the central bank is now empowered to impose heavy penalties, including of up to $1 million on anyone caught violating foreign exchange rules and regulations.
After nearly two decades of economic challenges, Zimbabwe faces acute shortage of forex needed to rebuild its recovering economy, which calls for efficient utilisation of limited hard currency.
RBZ governor Dr John Mangudya said corrective and punitive action had been taken against entities for abusing auction funds, manipulating the exchange rate and violating foreign exchange control rules and regulations.
Dr Mangudya said a cumulative US$1,5 billion has been allotted to beneficiaries since the auction system was operationalised in June last year, helping to stabilise the exchange rate and inflation.
“Of the total of 39 entities, 27 have been fined to date and 12 have been issued with written warnings for aiding or abetting flouting of exchange control rules and regulations,” Dr Mangudya said.
The central bank chief said the punitive measures included prohibitions from participating in the foreign exchange auctions until the full payment of fines imposed or permanent blacklisting from the auction.
Former Monetary Policy Committee Member (MPC) Eddie Cross said the auction system was now the principal and preferred mechanism for distributing scarce foreign currency in the country.
As such, he said the central bank was justified in meting out heavy punitive measures, in line with SI 127, against errant companies, which should reinforce the platform’s role in equitable distribution of forex in the country.
“Some companies have been abusing the system by fabricating documents. The Bank has been justified in taking heavy penalties against abusers.
“It is a good move, it reinforces the role of the auction as an allocating mechanism for forex,” he said.
So effective has the forex auction system been that annual inflation, which hit a post dollarisation high of 837 percent in July last year, has reduced to 106,6 percent as of June 2021.
Dr Mangudya is on record saying the bank projects the annual rate of inflation to drop further to below 55 percent this month, and to take a further plunge to under 25 percent by year end.
Inflation has taken an exponential decline on account of stable exchange rate ($85/US$1), stringent monetary targeting framework as well as fiscal consolidation and discipline by the Treasury.
Zimbabwe’s rate of inflation hit an all-time high of 500 billion percent in August 2009, according to the International Monetary Fund (IMF), which wiped out decades of savings for pensioners.
Dr Mangudya said 1 545 entities have benefited from the main auction system, getting US$1,406 billion, since its inception on June 23, 2020. A total of 2 443 small enterprises received US$138 under the SMEs auction.
He said 63 percent of the allotted funds through the auction system were given to importers for raw materials (US$639 million), machinery and equipment (US$281,2 million) and consumables (US$150 million).