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Auction system disburses over US$4 billion

Auction system disburses over US$4 billion

Story by Owen Mandovha, Business Reporter

THE introduction of the foreign currency auction system by the Reserve Bank of Zimbabwe in June 2020 has paid dividends after the mobilisation of forex which has sustained recovery of the manufacturing sector and growth of the economy.

In 2018 and 2019, the economy was grappling with an acute shortage of foreign currency for critical imports of raw materials and capital equipment which affected the government’s economic growth plans as manifested in low manufacturing capacity of below 35% on average.

This scenario created a fertile ground for a flourishing parallel market of foreign currency before, the Central Bank introduced the weekly foreign currency auction system in June 2020 aimed at mobilising hard currency through formal channels.

According to statistics released by the apex bank, the platform has so far disbursed over US$4 billion to various economic players, a huge trigger in the successful resuscitation of the manufacturing sector where capacity has leapt to over 70% on average.

Breaking down these disbursements, statistics show that during its year of introduction, US$624 million was allotted in the six months of operation, with the figure growing to US$1,97 billion in 2021, a period that witnessed the incessant importation of machinery which went a long way in retooling the manufacturing and mining industries.

In 2022, total allotments were slightly lower at US$1,1 billion as signs of foreign currency saturation in the economy began to reflect.

In the seven months to July this year, the central bank allotted US$382 billion, bringing the total value of allotments to US$4 093 000 000.

Alongside other monetary measures introduced by the Central bank, the economy has been on a sustained growth trajectory, averaging over five per cent in the last three years, with the RBZ having come up with the right mix of policies to eliminate any potential threats to the economic growth targets enshrined in the National Development Strategy One policy document.

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