Zimbabwe: Currency Collapse Forces RBZ to Ditch Forex System

The Reserve Bank of Zimbabwe (RBZ) has announced it will resume a floated foreign currency exchange rate system next Tuesday, which will be conducted on weekly basis.

The central bank affixed the exchange rate at US1:ZW$25 in March, abandoning the market determined exchange rate, a move which drew condemnation from stakeholders of various sectors, including farming and mining companies.

While the exchange rate is stuck at US$1:$25, the parallel market was trading at around US$1:80, a scenario that has aggravated market distortions.

"The bank wishes to advise the public that the foreign exchange auction trading system will be operational with effect from 23 June 2020," RBZ governor John Mangudya said in a statement.

"The adoption of a foreign currency auction system is expected to bring transparency and efficiency in the trading of foreign currency in the economy."

Bidding conditions and qualifying criteria is such that the bidders will submit bids as individuals, firms and public enterprises through their authorised dealers and will submit only one bid per auction.

Mangudya said allotment of forex to winning bids will be based on the import priority list, adding that the auction will accept minimum bids of US$50 000 and maximum of US$500 000 per auction.

"The bidding platform shall be the Reuters foreign currency auction system, which shall be linked to the computerised export payments Exchange Control system (CEPECS and Computerised Exchange Control Batch Application System CEBAS," he said.

Mangudya added that successful bids shall be allotted in full but if funds are not enough allotments shall be on a pro-rata basis.

He said information to be included in bids include the name of authorised dealer, name of applicant, type of transaction and sector category, bid amount in US dollar, bid rate and the Zimbabwe dollar equivalent and FCA balance declaration and relevant import invoice.

"Any entity found participating in the auction for the sake of currency manipulation shall be disqualified from participating in the auction system. Entities with positive balances in their nostro accounts will be disqualified from participating in the auction system unless they provide justification," Mangudya said.

He said bids by red-flagged entities with overdue forms CD1,third party bids and "unacquitted" bills of entry shall be disqualified.

The foreign exchange auction system shall be funded from offshore facilities arranged by the bank and forex availed through surrender requirements which will be liquidated at the prevailing market rate and export precedes liquidations upon.

It will also be funded through foreign currency exchange by exporters and free funds holders through the banking system at the prevailing market rate.

Cut off time for submission of bids will be 0900 hours and results will be submitted by 1630 hours on the same day.

More From: Zimbabwe Independent

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