The Zimbabwe dollar eased a minute 0,06 percent in the last auction of the year yesterday to close at $81,7866 to US$1 with the four December auctions setting a new monthly record for allotments of US$125 million as the system continues to supply the requirements of the productive sector at a stable rate.
Since the foreign currency auctions were introduced at the end of June by the Reserve Bank of Zimbabwe and Government a total of just under US$625 million has been allotted in the 27 weekly auctions.
More importantly, over the last four months more than US$110 million has been allocated each month, with most economists reckoning that the productive sectors need a minimum of US$100 million a month.
The higher allocations suggest that the economy is growing, and while weekly bids fluctuate moderately, the general trend is one of an upward trend. The auction rules limit bidders to those wanting to import or pay for services that are on the priority lists, meaning that almost all the sums allocated are used by the productive sectors rather than for consumption.
This is why raw materials, machinery, spare parts and chemicals dominate the allocations on both the main auction and the SME auction. Spares have a higher percentage regularly in the SME auctions because so many of the productive businesses in this sector specialise in the servicing and repair of equipment and vehicles and have moved into becoming direct importers.
The exchange rate has fluctuated in a very narrow band since the beginning of September when it basically reached almost total stability after the price discovery process of the first two months of auctions, and in fact reaching its highest level of $83,40 at the end of August. Since then the gentle rising and falling each week have seen the rate moving a few cents each week, sometimes up and sometimes down, between around $81,35 to $81,88.
That stability has been seen as crucial for Zimbabwean industry, who are now guaranteed they can buy required currency at a rate that is generally easy to predict within a few cents, and for Zimbabwean consumers, who have seen the prices of local products, which now dominate supermarket and shop shelves, remaining largely constant.
Such stability of exchange rates and prices has kept monthly inflation very low.
Because the exchange rate and the pricing calculations are market-driven and based on underlying fundamentals following fiscal and monetary reforms, they are seen as inherently stable, rather than having something imposed.
Yesterday’s auction was the last of the year. The first auction of next year is on 12 January. The Reserve Bank decided on a gap because most of the productive sector, which takes almost all the auction currency, is on its annual shutdown from this week with indications that industrialists have built up adequate stocks of both raw materials and of finished products to supply during the break.