The foreign currency auction is still not interactive with customers because of the Reserve Bank of Zimbabwe’s firm grip on the system and there is need for government to decentralize it with the Zimbabwe National Chamber of Commerce arguing that banks and bureaus de change among other monetary institutions should be allowed to participate in the system.
In its proposals for the 2021 national budget statement submissions to the Ministry of Finance and Economic Development, the ZNCC said there was need to decentralize the forex auction system so that it can be conducted by individual banks rather than the Central Bank.
The ZNCC further argues that banks have better visibility and interaction with clients and should be made accountable for the auction system and that results should be published across the market allowing customers to evaluate their positions on an online or live system.
“All players, banks, bureau de changes e.t.c, should become active and until over the counter transacting of forex is made possible, we will continue to have unstable local currency.
“There is need for a reduced role of the RBZ in buying and selling forex and have everything done by the market so that the rate is seen to be market determined for more confidence,” ZNCC said.
The Chamber said the RBZ should not influence the exchange rate to allow equilibrium: “Market forces should be left to determine the exchange rate – as long as the priority list is in existence stability is only for the prioritized products that get traded at the auction but other products that do not make the list are imported from foreign currency sourced elsewhere.”
According to ZNCC, the foreign currency auction system should not act as a platform for primary forex distribution but rather price discovery.
“There is need to promote an auction which is divorced from the RBZ, which will then lead to the creation of an efficient inter-bank market in the medium to long term.
“Government procurement processes, especially when it involves foreign goods need to be improved so that it does not destabilize the markets. Forex buying for state requirements should be done through the Auction system.
”In a 40-page presentation, the ZNCC said the Central Bank should create formal banking channels for dividends and capital repatriation so as to improve the ease of doing business climate and attract investment.