Zimbabwean forex auction best expression of market forces

FINANCE and Economic Development Minister, Professor Mthuli Ncube, says the forex auction system is the best expression of the market forces hence it is being embraced by the wider business community.

He dismissed sentiments that the auction system, which was established in June last year by the Central Bank, was being controlled by monetary authorities.

The Zimbabwean dollar has maintained stability albeit with negligible fluctuations, trading at 1:83,8 this week, against the green back.

This stability has been credited for price discovery and improved access to forex by the productive sector.

“First of all, let us be clear, the auction system is not fixed.

“The auction system only releases to the public as a communication point,” said Prof Ncube while responding to a question in Parliament on Wednesday.

“The auction system is not rigged, fixed, or manipulated.  The auction system represents the best expression in choice.

“You go there and you express whatever exchange rate you want.

“It is up to you. If you want to buy United States dollar at 1:1000 it is up to you.  We will actually sell to you to teach you a lesson.

“If you want, I will come to that . . . So, you choose your exchange rate.

“That is why when we publish the results, we show a range, from the highest to the lowest.

“What we then communicate is the weighted average.  That is all.”

He said the weighted average has been stable with positive feedback from the industrialists as the local collar is retaining value.

“For the first time in three years, companies can plan.  Speak to the companies and that is what they will tell you,” said Prof Ncube.

“So, the auction system represents a market-oriented choice friendly and choice promoting system and it has delivered stability.”

MDC Alliance legislator and former finance minister Mr Tendai Biti had earlier raised concern over the mismatch between official forex auction rate and the parallel market rate, which is slightly higher.

He claimed the official rate was artificial and pushed for re-dollarisation, which Prof Ncube flatly rejected.

“We cannot adopt anything else that undermines that stability such as this other market that the Honourable Member was referring to.

“No, we cannot do that.  We have to stick to the auction rate,” said Prof Ncube.

“That is what has delivered order and stability.  The auction system is driven by free market forces because you can choose any exchange rate you want. You cannot be freer than that.” – Herald