Govt to adequately fund forex auction system

The Second Republic will leave no stone unturned in its endeavour to turnaround the economy and will ensure that the foreign currency auction system is adequately funded and that the relevant authorities will enhance efficiencies within the system.

Speaking during a State of the Nation (SONA) address in Parliament yesterday, President Mnangagwa pointed out that the financial services sector is stable with the foreign currency auction system managed by the Reserve Bank of Zimbabwe performing well and accessed by both large and small to medium size businesses.  

President Mnangagwa, however, said there is need to enhance efficiencies within the system.

"Going forward, my Government will ensure that the platform is adequately resourced and that the relevant authorities enhance efficiencies within the system," he said.

There have been some challenges in the system whose failure to meet demand has resulted in a growing backlog stretching over 15 weeks in some instances and as high as US$150 million.

The lag in supply has become a driver of the widening parallel market premium, which is now more than 100 percent at the official exchange rate and Government has vowed to deal with the situation.   

According to industry representative body the Confederation of Zimbabwe Industries, the widening premium arbitrage, distortions and inflation pressures are threatening stability that was being enjoyed.

"This has also increased preference for the USD among economic agents making the ZWL$ vulnerable and the inflation environment precarious," reads part of CZI's briefing to its members seen by this publication.

Some suppliers are already demanding US dollar payments only, while others are prioritising US dollar denominated orders at the expense of locally denominated orders according to industry players.

In September, inflation showed signs of creeping up after increasing by 51.55 percent from 50.24 percent in August 2021.

Furthermore, the month-on-month inflation rate in September was at 4.73 percent, representing an increase of 0.55 percent from the August 2021 rate of 4.18 percent.

The Reserve Bank of Zimbabwe now expects the annual inflation rate to end the year between 35 percent and 53 percent, up from an earlier estimate of 25 percent to 35 percent.

In addition to what the central bank is doing, Treasury has also said it will get the Zimbabwe Revenue Authority to carry out impromptu audits of corporate activities.

"Regulatory bodies including the Public Accounts and Auditors Board, will also be working on a framework to impose appropriate financial and professional sanctions on members" who may be complicit in superintending over illicit affairs by corporate entities which they are charged with.

"Business who disregard the law and continue to price their goods on the parallel market will have their licences suspended," reads the statement by Finance and Economic Development Minister Mthuli Ncube.

Mr Walter Mandeya, a market analyst with Trigrams Investments, said Minister Ncube might have just made one of the most profound policy announcement of his tenure by threatening professional licences of individuals found to be complicit in parallel market activities.

"Sanity in Zimbabwe's economy will only happen sustainably when stakeholder interests align for the benefit of the country or put differently not compete against the country's interests," said Mr Mandeya.