Zimbabwe’s Monetary Policy Committee has urged the Reserve Bank of Zimbabwe to clear the foreign currency allotment backlog of US$175 million within a month to enable the bank to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction.
The MPC met on Friday and welcomed the impressive performance of foreign currency receipts which increased by 32% to US$5.09 billion as at 7 August 2021 compared to US$3.85 billion received during the same period in 2020.
Payments increased by 42% to US$3.59 billion as at 7th August 2021 compared to US$2.52 billion for the same period in 2020.
The Committee agreed on the following resolutions for sustaining the current downward inflation trajectory and exchange rate stability:
- Maintaining the Bank policy rate at 40% per annum and the interest rate on the Medium Term Bank Accommodation Facility at 30% per annum;
- Maintaining the reserve money target at 20%, with the desire and view to achieving a lower level of monetary expansion by year end, particularly if inflation and other macroeconomic developments make it necessary and prudent to do so.
- Upholding the measures pronounced in the recent Mid-Term Monetary Policy Statement in relation to expunging the foreign exchange allotment backlog of around US$175 million. The MPC urged the Bank to clear the backlog in a month’s time to enable the Bank to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction. The MPC also emphasised the need for banks to avoid the use of overdrafts to fund auction allotments except in exceptional circumstances in support of productive sector activities.
- Refining the foreign exchange auction system to enhance its purpose as a dependable and efficient mechanism of availing foreign currency to the economy by aligning the auction bidding process to the ultimate beneficial ownership concept as follows:
- Maintaining the US$500 000 and US$20 000 maximum bid limits for primary producers under the main auction and SMEs auction, respectively;
- Capping bid limits for secondary users, consumables and services at US$100 000 under the main auction; and
- Encouraging the business community and banks to ensure that they exercise customer due diligence on all foreign exchange transactions in compliance with international best practices.
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