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Zimbabwe government urged to abandon auction system

08 Nov 2021 at 10:04hrs | Views
In a video making rounds on social media, the Zimbabwe government has been urged to abandon its auction system if it entertains hopes of fully reviving the economy.

In the video, an investor speaking in Glasgow, Scotland is heard saying, "In the case of the US and the Zimbabwe dollar, I would recommend to let it float, no interference, no auction, no allocations and let the exporters convert what they want to, and as the people gain confidence in the exchange rate, the Zimbabwe dollar will appreciate in value."

Apparently, Finance Minister Professor Mthuli Ncube was advised to abandon the auction system a week earlier by the Parliamentary Committee on Budget, Finance and Economic development at a Pre-Budget seminar in Victoria Falls.

UCT alumni Energy Mutodi told the Minister to move away from the auction system saying it was causing arbitrage in the economy and fuelled the parallel market.

"The auction system in Zimbabwe, while intended for good reasons has continued to cause arbitrage in the economy where firms by the forex at a cheaper rate at the auction and resale at a higher rate on the parallel market. The system has also allowed politically connected individuals to benefit at the expense of the rest..", said Dr Mutodi.

The Parliamentary Budgets committee recommended that only firms in need of foreign currency approach the RBZ for assistance and the exchange rate be left to float so as to allow the economy to operate on purely market terms.

Over the period 2017 to the present, the country has failed to attract foreign investment due to an unstable currency, unfavourable policies and inconsistencies among other reasons.

Source - Nicholas Ncube
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