RBZ vows to clear US$175m allotment backlog by month end

THE Reserve Bank of Zimbabwe (RBZ) says it will clear the US$175 million foreign exchange allotment backlog within a month.

The delay in allocating the foreign currency on the auction market which began in June last year has led to major bottlenecks for companies which access the forex on the platform, thereby crippling their operations.

According to the Confederation of Zimbabwe Industries (CZI), companies were waiting for as long as nine weeks to receive funding from the auction system.

In a statement on the resolutions of the Monetary Policy Committee (MPC) meeting held on Friday last week, RBZ governor John Mangudya said they had resolved to clear the backlog to allow the central bank to operate the auction system within the set timelines.

"The MPC urged the bank to clear the backlog in a month's time to enable it to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction," Mangudya said in the statement yesterday.

"The MPC also emphasised the need for banks to avoid the use of overdrafts to fund auction allotments except in exceptional circumstances in support of productive sector activities."

The committee called for the refinement of the foreign exchange auction system to "enhance its purpose as a dependable and efficient mechanism of availing foreign currency to the economy by aligning the auction bidding process to the ultimate beneficial ownership concept".

This includes maintaining the US$500 000 and US$20 000 maximum bid limits for primary producers under the main auction and small-and-medium enterprises auction, respectively and capping bid limits for secondary users, consumables and services at US$100 000 under the main auction.

Mangudya said the MPC also resolved to further liberalise the operations of bureaux de change to promote financial inclusion by allowing them to process small value foreign currency transactions of up to US$50 per person per week on the basis of individual identities, with charges and commissions levied by the bureaux de change not exceeding 10% per transaction.

The other resolutions, he said, include maintaining the bank policy rate at 40% per annum and the interest rate on the medium term bank accommodation facility at 30% per annum as well as maintaining the reserve money target at 20%, with the desire and view to achieving a lower level of monetary expansion by year end, particularly if inflation and other macroeconomic developments make it necessary and prudent to do so.

Mangudya said the committee welcomed the performance of foreign currency receipts which increased by 32% to US$5,09 billion as at August 7, 2021 compared to US$3,85 billion received during the same period in 2020 with cumulative foreign exchange payments increasing by 42% to US$3,59 billion as at August 7, 2021 compared to US$2.52 billion for the same period last year.

"Against this background, the MPC emphasised the need for staying the course of the current monetary policy stance which has proven to be effective in combating inflation and fostering monetary stability in the economy," he said.