Zimbabwe: RBZ Allotments Surge to U.S.$14,5 Mln - Pressure Mounts to Rein in Parallel Market Rates

By Alois Vinga

The Reserve Bank of Zimbabwe (RBZ) Auction's allotments hit US$14,5 million responding to new year's foreign currency demands.

This comes amid mounting pressure for authorities to implement rigorous measures to rein in volatile parallel market exchange rates.

A trading update released at the close of business Tuesday shows that a total US$14,5 million was allotted on the main and SME Foreign Exchange Auction platforms up from US$10,8 million allotted in the previous week.

Market watchers believe that the upward trend signifies a swift response to increased industry needs prompted by the desire to kick start operations in the new year.

A closer look at the results shows that on the Main Auction platform shows that total bids accepted were 116 with raw materials needs receiving US$7,9 million, machinery and equipment US$942 396, consumables US$1 million, services US$1 million, retail and distribution US$1 million, pharmaceuticals and chemicals US$245 892.

The main auction platform received US$12,7 million with the SME platform receiving US$786 897 largely tilted in favour of supporting the country's productive sectors.

The exchange rate also depreciated by 3,8% with US$1: ZW$ 732 down from US$1: ZW$705,41.

However, the depreciation comes at a time when the parallel market exchange rate continues to hover around US$1: ZW$900 for commonly accessible bids for ordinary members of the public but has reached a high of ZW$1 200 in some retail outlets.

Contacted and quizzed on the strategies at hand to contain the pressures, RBZ Monetary Policy Committee (MPC) member, economist Persistence Gwanyanya said excess liquidity in the markets will be subdued.

"Working hand in glove with the treasury in the push for a tight Monetary Policy stance, the parallel market volatility triggered by payments made to contractors in the month of December 2022 will be curtailed," he said.

He noted that the existing instruments in the market like excess liquidity mop up instruments and gold coins added to the fact that apart from last month's sources of funds , there is no other conduit likely to derail the current efforts.

"The forthcoming MPC meeting will discuss at length the strategies of avoiding such shocks which may end up triggering parallel market exchange rate volatilities," he added.

This article originally appeared on New Zimbabwe

Photo: New Zimbabwe