Reserve Bank of Zimbabwe (RBZ) Foreign Exchange Auction resumed business Tuesday, allotting a total US$10,8 million amid expectations that foreign currency demand in the parallel market will ease off.
A trading update released at the close of business shows that a total US$10,8 million was allotted on both the Main and SME Auction platforms.
Priority was tilted towards the productive sectors of the economy, with raw materials on the Main Auction being allotted US$6,2 million, machinery and equipment US$1 million, consumables US$758 083, services US$777 633, retail and distribution US$680 217, pharmaceuticals and chemicals US$268 376, paper and packaging US$307 737.
The SME Auction platform received US$786 897 while the official exchange rate depreciated to US$1: ZW$705,41 down from US$1:ZW$ 671,44 reached when the auction closed for business last year.
Analysing the results, economist Persistence Gwanyanya said the platform resumed business on the back of rising foreign currency demand common when the year kicks off.
“This year trading kicked off a week earlier when compared to yesteryear and comes at an opportune time soon after the payment of government contractors who are likely to be deterred from using the parallel market as the main source for foreign currency.
“Of more interest is that going forward, there will be a number of measures to support the Interbank Market and nurture it to be the long term source of foreign currency while in the process reducing dependency pressures on the Auction,” he said.
Commenting on the developments on the parallel market which have seen the exchange rate reaching a high of US$1:ZW$1100 in some instances, Gwanyanya said such year-end seasonal peaks will not subsist since mitigatory measures are still in place.
“The depreciation of the local currency in the final quarter of 2022 was well expected because most people were offloading their money in the alternative market at a time when the formal markets were closed.
“But unlike in the past, there are fewer people chasing after the US$ in the alternative market since excess money supply is well in control and also backed by instruments like gold coins, which are an investment alternative.
“These measures are also supported by the use of free funds to carry out local transactions and this means that volatilities are well contained,” added Gwanyanya.