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Zimbabwe: RBZ to Clear Auction Backlog in One Month

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Senior Business Reporter

THE Monetary Policy Committee (MPC) has recommended that the Reserve Bank of Zimbabwe (RBZ) should clear the US$175 million outstanding bids at the foreign exchange auction within a month in line with the set rules of funding allotments within two weeks.

Meeting the set rules could become easier going forward after the MPC noted the impressive performance of foreign currency receipts, which increased by 32 percent to US$5,09 billion for the eight months to August 27, 2021 from US$3,85 billion in the same period last year.

RBZ Governor Dr John Mangudya said in a statement yesterday, after the MPC’s meeting on August 27, 2021, that the recommendation was in line with measures pronounced in the mid-term monetary policy earlier this month.

Earlier reports indicated the backlog at the auction, which has disbursed US$1,7 billion since inception, was reaching US$200 million, with outstanding but approved bids taking as long as two months due to logistical issues.

Ordinarily, the auction system is designed to operate on a T+3 cycle, meaning all bids must be settled starting from the third day after approval is granted during the weekly auction while they must be funded within a fortnight.

Smooth functioning of the auction system, introduced in June last year, will be critical in sustaining the prevailing macro-economic stability, anchored by exchange rate stability and exponential decline in the annual rate of inflation.

“The MPC urged the Bank to clear the backlog in a month’s time to enable the Bank to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction,” Dr Mangudya said.

The MPC also emphasised the need for banks to avoid the use of overdrafts to fund auction allotments except in exceptional circumstances in support of productive sector activities.

The committee further agreed to refine the auction system to enhance its purpose as a dependable and efficient mechanism of availing forex to the economy by aligning the bidding process to the ultimate beneficial ownership.

Measures will include maintaining the US$500 000 and US$20 000 maximum bid limits for primary producers under the main auction and SMEs auction, respectively as well as capping bid limits for secondary users, consumables and services at US$100 000 under the main auction.