THE Confederation of Zimbabwe Industries (CZI) says the foreign currency auction system introduced by the central bank in June will serve the economy well if authorities consolidate its operations by practising fiscal prudence and monetary discipline.
BY MTHANDAZO NYONI
The forex auction system has been hailed as a game changer since it took off the ground four months ago.
Companies have described it as the driving force behind the stabilisation of the Zimbabwe dollar against the greenback during the period.
The auction system has defused the rampaging parallel market rate, which has declined from a high of US$1:$165 before its launch in June to the current US$1:$81,6.
“The positives include the stability of the exchange rate on both the formal and informal markets as well as the slowdown in inflation,” the CZI said in a report analysing the impact of the system on the economy.
“There has also been increased access to foreign currency by businesses,” it added, warning authorities not to tamper with the exchange rate.
CZI said the Reserve Bank of Zimbabwe should continue to fine-tune its guidelines to trading on the auction system in order to enhance clarity.
The auction, according to the CZI, can also “be strengthened by balancing money supply and demand, practising fiscal prudence and monetary discipline as well as levying taxes and fees in local currency”.
To address the runaway parallel market rate and restore confidence on the market, the central bank in June introduced the foreign currency auction system.
This was part of several interventions made by authorities to stabilise the Zimbabwe dollar which had depreciated in value at a frightening pace since its introduction as the sole medium of exchange for domestic transactions in June last year.
The year-on-year inflation rate had rocketed during the period, while frequent price hikes were threatening to ground the economy.
This week, 373 bidders participated on the foreign currency auction system where US$28,3 million exchanged hands.
The Zimbabwe dollar traded at US$1:$81,6 at this week’s auction.
The CZI said the system had ushered in a breath of fresh air, citing many positives that the economy was deriving from its presence.