The Government — through the Reserve Bank of Zimbabwe (RBZ) — intends to clear the foreign currency backlog at the auction system within a month-and-a-half, Secretary for Finance George and Economic Development Guvamatanga has said.
Speaking at the post Mid-Term Budget and Economic Performance Review hosted by Business Weekly in partnership with Zimpapers Television Network (ZTN) and the Confederation of Zimbabwe Industries (CZI), Guvamatanga said the backlog was manageable and would be cleared soon.
Although Guvamatanga did not specify the amount involved, former Monetary Policy Committee member Eddie Cross is on record saying the backlog is approximately US$200 million.
In its 2021 first quarter Business and Economic Intelligence Report, CZI revealed the existence of a foreign currency backlog at the auction system.
“Some companies have complained that it is taking a period of 8 to 9 weeks for them to access foreign exchange at the Foreign Exchange Auction Market, which creates the possibility of sourcing forex on the parallel market,” reads part of CZI’s Report.
While the official exchange rate is $85,72 as of Tuesday this week, on the parallel market the exchange rate is now at a huge premium trading between 130 and 150 to the greenback.
Government believes the parallel market constitutes less than 10 percent of the foreign currency market and should not dictate the exchange rate.
However economic players in the market are pricing their products, both imported and locally manufactured at the parallel market exchange rate.
Guvamatanga said with inflation coming down and production growing, the exchange rate should be strengthening.
He however said the existing backlog would be cleared.
“We would want to assure the market that within the next 30 to 45 days we will clear the backlog that is there in the auction system.
“We know what it is and it is very much manageable,” Guvamatanga said.
“What we receive on a monthly basis is very much adequate to support industry growth and demand for foreign currency.”
Guvamatanga revealed that the local banking sector is now sitting on US$1,7 billion in foreign currency deposits which banks are failing to utilise.
He said challenges being faced at the auction system is a reflection of an incomplete market as banks are not lending.
Lending should provide liquidity in the market.
“We have banks today who are sitting on 50 percent of their deposits which they are not lending, so the ecosystem is actually disrupted because we have US$1,7 billion sitting in foreign currency accounts which are not circulating in the economy.
“So if banks were lending that money, the companies which are currently coming to theauction would stop coming to the auction and that would actually complete the ecosystem of the economy,”he said.