Zimbabwe’s foreign currency auction system ,started in June last year, is working very well but the country has to deal with greediness, economic saboteurs and those who think they can benefit from arbitrage, the Deputy Minister of Finance Clemence Chiduwa told Parliament yesterday.
Responding to questions about what the government was doing to stop currency dealers from operating in shops where they were enticing those with foreign currency or cash to give them cash and swipe for their goods instead, Chiduwa said there was nothing illegal about someone swiping for another but what was illegal was dealing in foreign currency.
Asked whether this was not because the foreign currency auction system was not working efficiently, Chiduwa said: “The market is driven by market fundamentals; the Dutch Auction System is an open system where those who would want to buy foreign currency should go and bid. There is no control over the bids that are submitted by bidders.
“Whatever comes from the auction is a reflection of demand and supply. Anything outside that is done by speculators. The existence of speculators does not mean that the Dutch Auction System is not efficient.
“Our system is efficient but what we need to deal with is the issue of greediness, economic saboteurs and those who think that they can benefit from arbitrage. Arbitrage is not only existent in Zimbabwe. Speculators are everywhere and the issue of the differential between the market and the parallel market rate is not something that is peculiar to Zimbabwe, it is everywhere.
“The moment the differential is driven by greediness, then it becomes a challenge to us and this is why we had to come up with those intervention measures but in terms of the efficacy of the auction system, we are happy that the auction system has brought stability in prices.”
Zimbabwe introduced the foreign currency auction system in June last year with the local currency kicking off at $57.36 to the United States dollar and closing the year at $81.79.
It kicked off this year at $82.09 and is down to $85.25.
The government has also introduced Statutory Instrument 127 of 2021 to enforce the pegging of prices at the auction rate and not the black market rate.
The new regulations have been opposed by business, but Chiduwa said: “Whatever problems that we are facing because of the intervention that we have made, these are transitory problems. It is a normal economic activity.
“What we are doing in terms of the intervention that we have done is that we are mopping up excess liquidity in the market. You will see that this is going to curtail a number of those parallel market activities. In terms of the efficacy of the market, we are happy with the performance and what is coming out of the market is a reflection of market forces, demand and supply for foreign currency.”
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