THE Reserve Bank of Zimbabwe (RBZ)’s forex auction system, which is saddled with a backlog of up to 13 weeks, has raised US$1,72 billion for companies, boosting their capacity to import raw materials and serve the domestic market, according to a statement by the central bank.
In its second-half Monetary Policy Statement, the central bank said 56 auctions had been conducted by the end of July, with a significant amount being allotted to small-to-medium-scale enterprises (SMEs).
“The foreign exchange auction system, which attained its first anniversary on June 23 2021, has contributed immensely in bringing transparency in the trading of foreign currency as well as the stability in the exchange rate which has culminated in price stability,”
central bank chief, John Mangudya said.
“After 56 main and 50 SMEs auctions, a total of US$1,72 billion had been allotted as at 27 July 2021, representing 98% of total bids submitted to the auction. Reflecting the importance of the SMEs sector, the share of allotments of the SME auction to total allotments grew from 3,5% in the third quarter of 2020 to about 14% in the second quarter of 2021,”
“The efficient allocation of foreign currency through the foreign exchange auction system has contributed to increased confidence and growth in economic activity. Encouragingly, the foreign exchange auction system continues to support the productive sectors of the economy with more than 70% of foreign exchange allotted going towards these critical sectors,”
Mangudya said the manufacturing sector accounted for 17 out of the top 20 auction beneficiaries during the period.
He said about US$325 million had been allocated towards recapitalising companies, resulting in the sector’s capacity utilisation increasing significantly.
The injection has seen up to 70% of products being consumed in Zimbabwe provided by local firms.
“Other entities are venturing into the export market.
“Increased capacity utilisation by industry has resulted in an increase in the demand for foreign currency on the foreign exchange auction system.
“This saw demand rising from about US$30 million per week in December 2020 to around US$45 million per week in July 2021,”
the central bank noted.
In addition to recapitalising companies, Mangudya said the forex auction system had boosted companies’ capacity to import key raw materials and equipment, and the sector was on track to reach 61% capacity utilisation by December from 47% in 2020.