THE Reserve Bank of Zimbabwe (RBZ’s) foreign currency auction system introduced two months ago continues to play second fiddle to the parallel market which has continued to flourish.
The auction system has failed to curb the parallel market that continues to mop up the bulk of the foreign currency from individuals in the country.
Zimbabweans abroad continue to feed the black market with money sent into the country through money transfer facilities.
The rates on the auction floors also continue to lag behind the black market rates which remain the most viable foreign currency exchange facility in Zimbabwe.
Market watchers said they feel the auction is not a proper representation of the situation on the ground.
They say holders of small quantities of foreign currency feel short-changed by the auctions where the RBZ strictly controls rates.
The parallel market is currently hovering at around US$1:$5 500 and there are indications that it could firm further if the auction rate continues to creep upwards.
The Reserve Bank has the power to decide the rate appreciation and fluctuation on the auction.
Zimbabwe Congress of Trade Union’s chief economist Godfrey Kanyenze said the parallel market would continue to exist until government and the RBZ address the issue of supply through increased production.
“We haven’t done anything,” he said. “There is still an absolute shortage of foreign currency. We need to look at the issue of supply.”
Kanyenze said the acute foreign currency shortage would continue to sustain the parallel market.
“There remains a shortage in the market and that gap is being filled by the black market,” he said.
The market attributes the increased activity on the black market to an increased number of rejected bids on the auction floors.
The central bank has thrown out more than 800 bids since inception of the auction system.
Officials privy to the auctions say most of the rejected bids were for holidays. This, according to the market consensus, creates a viable market for the dealers who offer the foreign currency at premiums.
The central bank however insists that the rejected bids were for less essential activities.
The Zimbabwean dollar has begun to take a bashing on the auction floors with rates being on the slide for the past three weeks.
Over the past three weeks the Zimbabwe dollar has lost ground against almost all major currencies.
After initially firming to about US$1:$3 600 the Zimbabwe dollar has now plunged to US$1:$4 214.
Major parallel market spots for traders in Harare this week continued to be a hive of activity despite government’s intensified blitz on them.
Harare’s Africa Unity Square, now a popular market for traders, has continued to supply the capital city with the greenback, South African rand and Botswana pula.
Members of the Apostolic Sect (Mapositori) sect are still trading despite heavy police presence.
The Road Port Station also remains a conducive hiding place for the traders.
Informal traders from neighbouring countries continue to off-load their foreign currency onto the black market, instead of the official banking channels riling the RBZ.