Forex auction bolsters productive sector

THE procurement of raw materials is dominating the allocation of foreign currency at the foreign currency auction.

Towards the end of June, the Reserve Bank of Zimbabwe (RBZ) introduced the weekly forex auction system with a view to improve access to forex by players in various sectors of the economy.

It is against this background that the monetary authorities have introduced a second forex auction system to cater for Small to Medium Enterprises (SMEs).

According to RBZ, results of the foreign currency auction conducted last Thursday, revealed that the bulk of the forex was taken up by companies that want to buy raw materials.

The results show that of the US$17,98 million alloted under the main auction system, a total of US$7,6 million went to the productive sector to fund procurement of raw materials.

A total of US$235 721 out of the US$789 866 alloted to the SMEs auction was also taken up by companies that intend to buy raw materials.

The forex exchange results also show that the Zimbabwe dollar traded at 82 against the US dollar from 80 a fortnight ago.

Industry players have recently lauded the new forex auction system for impacting positively on the productive sector.

Listed companies like Delta Beverages and Nampak have also said their prospects look brighter based on improved access to forex under the new trading system.

The shortage of forex resources has in the past been blamed for poor domestic production as companies struggled to import critical raw materials.

The Apex Bank introduced the forex auction trading model to replace the fixed exchange rate which was blamed for promoting a thriving parallel market where some companies were now buying forex.

This development also piled pressure on prices which were constantly increasing based on speculation resulting in the erosion of incomes.

Since the introduction of the forex auction system, there has been a significant lull in parallel market activities and some stability in prices of most commodities.

The Confederation of Zimbabwe Industries (CZI) has projected exchange rate convergence between the parallel market and official forex auction rates.

The Confederation of Zimbabwe Retailers president Mr Denford Mutashu said the country should target a full-market determined exchange rate.

“We need to sustain and support the critical foreign currency generators of our economy which is the productive sector. We need to reduce the over-dependency on importing finished products,” he said. —chronicle.co.zw

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