The Reserve Bank of Zimbabwe (RBZ) has failed to clear all outstanding foreign currency auction system allotments backlog going as far back as January.
According to captains of industry, the market needs US$320 million per week yet the auction is only supplying just over US$30 million per week.
This has left industry struggling to import critical raw materials. Speaking to Business Times recently, Confederation of Zimbabwe Industries president Kurai Matsheza said:
The RBZ governor [John Mangudya] keeps on promising us that he will clear all outstanding allotments but he has failed to do so three times and counting. The clearance of the backlog has not happened and it will not happen.
We still have some members whose allotments in January have not been cleared with some traced to 12 weeks back.
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the Government should come up with monetary policies that are biased towards the supply side. He said:
The auction system is not functioning properly as it has failed to help companies to access cheaper forex due to the late settling of allotments.
The governor gave some deadlines but without proper mechanisms that backlog will never be cleared.
We have bigger problems than we thought as the auction backlog is only a small picture of the forex backlog that the industry is facing. We require more money than the banks can give us.
They are many companies that need forex but are not able to participate in the auction system and they are part of the bigger problems that we are facing as an industry.
University of Zimbabwe economics lecturer Moses Chundu said the Government should admit that the Dutch auction system has failed. He said:
The system is sucking blood from the poor as it is not serving them, instead, eating into the little that they have. The authorities should agree that the system has failed.
Who is the auction system serving, in the past it used to help fuel companies?
If the auction system was effective, we were going to have a blended rate with some bit of the official rate and the parallel market rate but in this case, the parallel market rate is the one that was used.
Chundu proposed that the Government should abandon the auction system fully dollarise since forex deposits are going up because of increasing diaspora remittances and export receipts.