The auction system was established as a price discovery mechanism for the local currency as well as availing much needed foreign currency to local companies for production at a time the country was experiencing foreign reserves challenges.

Last month US$ 24.3 million was allotted to 132 beneficiaries under the Main foreign Exchange Auction and US$ 2.7 million was allotted to 207 beneficiaries under the SMEs Foreign Exchange Auction.

According to the RBZ, "a total foreign exchange payments for the period January 2022 to December 2022 were US$ 8 591 115 163 broken down as follows, (i) foreign currency accounts US$ 7 258 736 477 (ii) foreign exchange auction allotments US$ 1 114 154 171 and (iii) the interbank market US$ 218 224 515."

Total cumulative foreign exchange auction allotments since inception of the auction system now stands at US$ 3.7 billion which have significantly helped local companies to adequately procure essentials needed for production.

There is however concern over the mismatch between the auction rate and the parallel market rates which could destabilize the exchange rate market that has been experiencing some semblance of stability since Government set measures to tighten liquidity in the market second half of last year.

At the close of yesterday's auction, the Zimbabwe Dollar was valued at 705 against the American Dollar which is very much below the widely used parallel market rate average of 950.

The difference between the auction rate of 705 and the premium parallel market rate of 1100 is now 56 percent, presenting fresh pressures on the local currency.

Authorities have already issued a stern warning to government suppliers engaging in illegal foreign currency deals following bulk Zimbabwe dollar payments disbursed by Treasury last month.