Ncube claims forex backlog reduced

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Finance Minister Mthuli Ncube

BY HARRIET CHIKANDIWA
ZIMBABWE has reduced huge backlogs accumulated at the foreign currency auction system, Finance minister Mthuli Ncube said yesterday, adding that it would be “suicidal” to dump the platform.

The forex auction system came into the picture in 2020 as a price discovery mechanism.

However, it has assumed greater importance, with companies trooping to access foreign currency for their operations.

High demand has ended with the Reserve Bank of Zimbabwe struggling to release allocated amounts.

At one point last year, the central bank owed up to US$200 million following a cashflow crisis.

There have been few official alternatives to the auction system, leading to the emergence of a thriving black market where foreign currency is accessed at extortionist rates.

The Zimbabwe dollar was trading at US$1:$145 in the past week, against a parallel market rate of up to US$1:$320.

The spiking rate has led to claims that the official system has flopped, and new ways of finding foreign currency must be explored.

“If you have noticed in the last few weeks, what happened to the auction yesterday? We sold foreign currency to the tune of about US$32 million,” Ncube said in response to a question in Parliament.

“We have adequate resources to basically follow through with the provision of foreign currency to those who are successful in bidding for the foreign currency.  However, it is also correct that in the past, we have had a gap, a lag in the disbursements and that gap is being closed; it will be closed,” he said.

“What we have done in terms of the price discovery process, we have been fine-tuning it, we have noticed that — the first thing we did as the first step was to introduce the SME window.  We then followed that up last week by introducing a window through the banks on a willing-buyer-willing-seller basis of up to US$1 000 through the normal banking system.

“Again, this is meant to improve our price discovery process. The auction was designed and set up to deal with the price discovery process as well as to supply the much-needed foreign currency. You will notice the amount of goods that are on our shelves which are domestic, companies have been able to manufacture substitutes and import critical raw materials. All this has gone a long way in improving our economic performance. So the auction has really delivered in the supply of critical foreign currency to this economy,” he added.

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