HARARE – The Zimbabwe dollar depreciated 0,84 percent against the US dollar as indicated by the results of the Reserve Bank of Zimbabwe (RBZ) managed foreign currency (forex) auction conducted on Tuesday as analysts call for a market-based exchange rate.
This week’s weighted average was US$1: $87,6653 compared to the US$1:86,9267 weighted average achieved as of last week.
Batanai Matsika, head of research at Morgan & Co, and economist said the fundamental problems with the exchange rate can only be resolved by adopting a more market-based approach and allowing it to find its own level.
“Because of issues of maintaining the rate, this has created arbitrage opportunities that has resulted in a huge gap between the official exchange rate and the parallel market rate, which now averages around $175,” he said.
He noted that the delays by the central bank to release allotted funds will also unsettle the market as businesses also end up using informal channels of raising the US$, which in turn creates demand in the parallel market.
Economist and member of the Reserve Bank of Zimbabwe Monetary Policy Committee Persistence Gwanyanya Persistence Gwanyanya, said the country’s foreign currency management system is structurally weak.
He said this created room for arbitrage opportunities by those with access to the demanded currency, driving the parallel market rates.
This also comes as the RBZ on Tuesday banned 30 black-market currency dealers from operating any bank or mobile money accounts for a period of two years as part of bringing sanity in the market although some players argued the authorities might be targeting wrong people.
They argued the activities of the 30 individuals could not inflict such magnitude of harm to the economy.
Meanwhile, according to the results of the Auction system on Tuesday, a total US$41,1 million was allotted, with the bulk of the allotment going to raw materials followed by machinery and equipment.
In this week’s auction, US$31,9 million was allotted to the main forex auction while US$9,4 million was allotted to the Small to Medium Enterprises forex auction.
At least 1236 bids were received on the Small to Medium enterprises forex auction, with 1180 accepted and 56 rejected.
On the main forex auction, a total of 450 bids were received, 428 were accepted while 22 were disqualified. – Herald