BY CHIEDZA KOWO
THE foreign currency auction system introduced by the Reserve Bank of Zimbabwe (RBZ) last year set the right tone for scaling up foreign direct investment (FDI) inflows into the country, according to Benefit Washaya, chief executive officer (CEO) of the listed banking group, NMB Holdings.
In a note to the firm’s financial statements for the year ended December 31, 2020, the NMB chief said the exchange rate stability experienced since the forex auction system was introduced should be sustained to boost foreign investor confidence.
FDI inflows had slowed down since Zimbabwe entered a difficult economic phase from 2000, which saw the country receiving only a fraction of the US$5 billion per annum received by its regional peers.
Political and economic instability, high costs of doing business and a volatile currency were among the factors that had been influencing investor fatigue.
But in June last year, the RBZ introduced a foreign currency auction system to calm unsettled markets by deploying cheaper foreign currency to industries.
“We are encouraged by the exchange rate stability which has been prevailing in the second half of the period under review and remain hopeful that the stability will continue prevailing in order to create a conducive operating environment for business and the attraction of capital which will go a long way in ensuring economic growth and stability in the foreseeable future.
“Our hopes remain pinned on the sustainability of this stability which will certainly foster economic growth into the foreseeable future,” the NMB CEO said.
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He spoke as several Zimbabwe Stock Exchange-listed firms attributed improved foreign currency availability to the auction system, which had allotted almost US$800 million by end of February this year. The first half of 2020 had been frustrating for Zimbabwe’s industries.
Parallel market rates hit US$1:$165 around March, firing up inflationary pressures and igniting a price rage.
Annual inflation increased to 837,5% in July before declining to 348,6% in December.
“The first half of the year under review was characterised by hyper-inflation and incessant economic instability emanating from the deterioration of the country’s foreign exchange rate.
“However, the introduction of the RBZ administered foreign exchange auction system on 23 June 2020 appears to have significantly contained the rapid oscillations that were characterising the country’s foreign exchange rate.
“Significant trades have been recorded on this platform from its inception and there has been notable stability in the foreign exchange regime ever since the auction system was introduced,” Washaya said.
The group’s net interest income increased to $618 million during the review period, from $577 million during the comparable period in 2019, tracking improved deposits, which increased by 17%, $6,3 billion.
This figure was $5,4 billion during the comparable period in 2019. Profit after tax increased to $849 million, from $377 million previously.
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