By Margaret Kamba
The Reserve Bank of Zimbabwe says the introduction of the Dutch Foreign Exchange Auction System has resulted in a stable pricing model.
The New Dispensation under the leadership of President and First Secretary of ZANU PF Cde E.D Mnangagwa has pledged to deliver the country to attaining vision 2030.
In a recently published Monetary Policy Mid-term review, the Bank noted that while prices had become stable, a few bad apples going against this need to be brought in line.
"The introduction of the Dutch Foreign Exchange Auction System has so far achieved its key objective of price stability and has greatly assisted in creating transparency in the management of foreign exchange and in price discovery of the market exchange rate," it said.
"This has restrained the speculative pass-through effects of the exchange rate on the pricing of goods and services in the economy. Sustaining the auction system is therefore crucial in fostering price stability in the economy."
It noted that "whilst the Bank is encouraged by the fact that some business entities have realigned their pricing models to the auction determined exchange rate, other entities are not complying and charging for goods and services at rates higher than the auction rate despite accessing foreign exchange from the auction.
"Such practice of forward pricing of the exchange rate goes against the positive outlook on the exchange rate that is showing consistent signs of convergence as evidenced by the continued narrowing of the bands between the highest and lowest foreign currency bids and the reduction in the parallel exchange rate premium to below 15 percent."
Meanwhile the Bank also noted that "stability and predictability of the exchange rate have been supported by the buoyant external sector, which continues to exhibit resilience as evidenced by a stable trend in performance of exports and international remittances, notwithstanding the adverse impact of COVID-19.
"The country recorded a positive foreign currency net position of US$1.3 billion for the six months ending 30 June 2020, compared to a deficit of US$738.7 million for the same period in 2019.
"Sustained export performance is critical for the steady supply of foreign currency needed to sustain the economy."