Delays in the payment of funds companies bid at the foreign currency auction system is taking a toll on the market as it affects the payment of foreign debts, Institute of Chartered Accountants of Zimbabwe (ICAZ) president Duduzile Shinya has said.
Shinya’s remarks come at a time when the auction system is experiencing serious glitches which have seen the Reserve Bank of Zimbabwe (RBZ) taking at least 14 days to release the forex.
Last week, the RBZ governor, John Mangudya, after refining the system, the bank was now taking at least 14 days from the date of auction to pay.
“There had been noted delays in allotment of money after bidding which caused delay in the settling of foreign debts. These delays generally have an impact of increasing costs and thus reducing local products’ competitiveness. This also tends to reduce confidence in the interbank market,” Shinya said.
“The bank should continue to refine the auction system further and design more efficient and timely allotment measures which reduce the time lag between bidding and allotment.”
Several other company executives told Business Times that there were serious glitches with the central bank failing to efficiently release funds from the auction system.
The central bank governor admitted more needed to be done.
Treasury permanent secretary George Guvamatanga said last week that the government has adequate resources to sustain this year’s auction system.
“We have enough resources and this year, the auction will be fully supported, based on our projections,” Guvamatanga said.
In his monetary policy statement, Mangudya said of the total amount allotted on the auction to date, more than 70% has come from surrender requirements on exports and domestic foreign transactions.
The upward review in the surrender ratio for exporters to 40% from 30% and the removal of the 60- day liquidation requirement on unutilised export earnings in January this year was meant to increase the supply of foreign currency onto the auction from the exporters, and at the same time providing flexibility in the usage of foreign currency earnings.”
Shinya said RBZ should consider the introduction of an efficient and effective mechanism to allow exporters to access their foreign currency on the auction should they be undergoing capital intensive operations or face any other capacity or liquidity challenges.
“It is also important to increase local production to reduce the pressure on the auction particularly on two components, that is, raw materials and agricultural produce (maize, soya, wheat).
Agricultural produce is a low hanging fruit as this will save the country significant amounts of foreign currency and more so if there is value addition of the produce which is also part of some of the raw materials being imported,” she said.