• Rate scaled up by 0.25 above ZW85 tally

  • Total amount allotted declined by US$5.1m

  • The grand total award fell to US$46,5 million from a previous record of US$51,7m

 

Harare - Zimbabwean dollar has further lost ground as of 31 August 2021agains’t the US$ as it inched up 0.2% on the foreign exchange auction market from a value of ZW85.9 against a single USD denomination to open the new month of September higher at ZW86.0551, breaking past the US$1: ZW85 tally.

 

The depreciation of ZW value comes amid the uptick of August month-on-month inflation to 4.18% from 2.56% in July after inching 1.62% against the RBZ target of below 3%.

 

Total number of bids received by the SME depleted to 932, easing 39 bids while the big companies increased nine more bids to close higher at 444 from 425 during the prior week signalling unwavering demand for the greenback.

 

The highest bid allotted for the big companies last week at 90 against a single USD remained unchanged, indicating consistency in the demand for foreign currency by companies to recover from the wounds of the COVID-19 pandemic.

 

Meanwhile, the SME auction market maintained the number of disqualified bids at 31 with the number of bids accepted declining by 36 to 901 from 937 accepted last week.

 

Disqualified bids for the main auction amounted to 65 from previously 26 after gaining 39 more, with the accepted bids settling at 379 from a previous firmer number of 399.

 

According to the Central Bank, Tuesday’s highest and lowest bids received were unshaken from the prior week’s as they remained tied at 83 both for the SME and the main auction.

 

As a result, the total amount allotted to both auctions lowered to US$12,4 million and US$34,1 million declining by US$2,7 million and US$2,4 million in their respective orders.

 

The grand total award fell to US$46,5 million from a previous record of US$51,7 million with the manufacturing sector continuing to procure more funds for the importation of raw materials, machinery and equipment.

 

Going forward, allotment of bigger funds for the procurement of raw materials is expected to increase or dominate the auction market as government and consumer spending and demand for goods and services tends to increase in the second half of the year which consequently drives up the demand for raw materials by producers who will turn to the auction in order to increase their supply.

 

Meanwhile, the Central Bank reviewed yesterday that the system is still in arrears amounting to US$175 million, which the Monetary Policy Committee recommended to clear in one month.

 

Greenlight for the clearance of the backlog has been signalled by the increase of foreign currency receipts by 32% to US$5,1 billion for the eight months to August 27 2021 from US$3,9 billion during the same period last year.

 

However, with earlier reports in July this year indicating that US$1.7 billion, an amount less than US$2 billion had been disbursed to the auction, it shows that the Central Bank had been allotting funds it doesn't have and common sense tells that most businesses which fail to get US$ on the auction market on time might source the funds on the black market causing a surge in the parallel market rate.

 

The Zimbabwean economy is dominated by informal traders and SMEs which the majority of them do not have access to funds on the auction market due to various reasons and might then go for the greenback on the parallel market.

 

In the real world, the parallel market rate has surged to over RTGS140 to US$1 against the Central Bank’s RTGS86,1 reviewed yesterday and the spike in the parallel market rate is an acidic test for the bank as it devoid the worthiness of the auction market which was introduced to curtail market instability that was driven by spiking parallel market rates in June last year.

 

Last year, the Central Bank introduced Statutory Instrument 127 to punish the companies who abuse the auction market funds and manage the parallel market, a crystal clear indicator that the official rate is not reflecting what is on the ground.

 

Equity Axis News