The Confederation of Zimbabwe Industries (CZI) has called for the Reserve Bank of Zimbabwe (RBZ) to temporarily reduce the forex auction allocation to US$25 million over the next three weeks and instead focus on clearing the backlog.
“We recommend the following additional measures: temporary reduction of the total amount to be allocated at the auction market to about $25 million or less over the next three weeks while clearing the auction backlog; adopt a first in first out (FIFO) method in clearing the backlog.”CZI (via The Chronicle)
As good as this sounds it further underscores the big problem with the forex auction, that of supply and demand. The fact that supply is far behind the appetite for forex means that even if the RBZ does heed this call, it doesn’t change much in the grand scheme of things because there wasn’t enough forex, to begin with.
In saying that, the CZI did make another recommendation which is very useful and it was that the RBZ should communicate the amount of forex available at least 24 hours before the auction begins.
This provision will make it so that expectations are tempered and the central bank isn’t overpromising. Although, it should be mentioned that this measure is probably not going to be implemented because, for whatever reason, the illusion that the RBZ is on top of the foreign currency issue supersedes all at the moment.
The central bank recently had a meeting with business leaders in order to address black market forex trading. The outcome of that meeting, as was stated in the press release, was much ado about nothing because it was mostly SI 127 of 2021 reiterated.
More concerning was the exclusion of the informal market in the discussion. I know it would be difficult to properly represent the entire industry, however, it is the biggest employer aside from the government.
Engaging the informal market would not only better attune the RBZ to what is happening outside of the financial system but it would also be a way for the central bank to find better solutions to integrate it in revenue collection aside from the Intermediary Money Transfer Tax (IMTT) or the 2% Tax.
At any rate, it will be interesting to see if the RBZ even considers the changes recommended by the CZI or it will be business as usual…
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