The foreign currency auction is not open to manipulation as bidders make their own applications, setting their own exchange rate, which are submitted to the auction through their banks.
Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, said this in an interview with The Herald on Friday, following unsubstantiated claims by critics who feel there was a “hidden hand” in the recent firming of the local currency against the US dollar.
After last week’s auction, the rate came down by 0,24 percent to US$1:$81,49, the fourth auction in a row that had seen a tiny firming after the first 10 auctions showed the rate rising, but with only tiny rises from early August.
The auction takes place every Tuesday.
Dr Mangudya said the auction system was transparent.
“For one to suggest that the forex auction process is not transparent is hypocrisy and such people should not be taken seriously,” he said.
“For starters, bidders for forex determine their own exchange rates without the Reserve Bank’s involvement.
“Bids are submitted to the auction through bidders’ banks at the exchange rates and bid amounts of their choice depending on their requirements.”
He said the role of the RBZ under the forex auction system was to provide a trading platform for banks’ clients to be allotted forex at their chosen exchange rates from the pool of foreign exchange at the Reserve Bank, which is obtained from the statutory foreign exchange surrender requirements.
He said such a role makes the auction an appropriate and transparent market for the management of foreign exchange on a willing-buyer willing-seller basis.
“The added advantage of the Dutch auction foreign exchange system is that bidders are allotted forex at their bid rates, and not at the Reserve Bank rate.
“The level of activity at the auction where to date US$240,5 million has been made available to the market over three months from 14 auctions is quite commendable,” said Dr Mangudya.
Zimbabwe National Chamber of Commerce (ZNCC) president Dr Tinashe Manzungu said he did not understand why there were suggestions of rigging the exchange rate.
“The rate is a weighted average of accepted and allotted bids and our members are confirming that they are getting forex at rates that they put in their bids and we don’t understand where the said rigging is coming from.
“We are actually carrying out a survey on this subject whose results will be published in October 2020 and the results of that will tell us more,” said Dr Manzungu.
Pan African Chamber of Commerce board member Mr Langton Mabhanga weighed in saying the emerging stability of both the exchange rate and prices, due to the forex auction regime, requires support from citizen including “sceptics, pessimists”.
“Generating and yearning for negativities for political pickings diminishes national collectivism in the reconstruction agenda. As business we are warming up to the positive strides that the economy is pacing,” said Mr Mabhanga.
Since the introduction of the forex auction, it has greatly assisted in stabilising prices in the economy over the past three months.
Dr Mangudya said such price stability was the basis that the RBZ expects monthly inflation to remain low at below five percent in the last quarter of the year.
The positive outlook is also supported by the increase in productivity in real sectors of the economy due to availability of forex from a formal and dependable auction market.