For the longest time, the RBZ and the government have been telling everyone that the auction-rate was the “official” and correct rate. That the black market rate was rigged. The black market was based on nothing but speculation and was the work of some unknown dark forces. Well, in the latest tacit admission yet that they have been wrong all along, the auction rate moved by an astounding $85 ZWL from below $170 ZWL to $254 ZWL. Just to make sure you appreciate the scale of all this you should know that even wild black market rates do not move by that much in a single day. In fact, the last time this happened in a single day was back in February of 2019 when the government abandoned the 1:1 exchange rate. Another incident they recently admitted was a mistake. Soon, just as the government predicted the auction and willing buyer willing seller rates will be almost the same.
The massive decline in allocations
That is not the only shocking highlight from this week’s RBZ auction. There was a massive fall in allocations from the usual US$25+ million each week to a paltry US$6.5 million. A drop of over Us$19 from the allocations of the last auction and even that allocation was another drop. The drop can be explained by the fact that the RBZ auction has struggled to clear the backlog that businesses have consistently complained about. No one wants to part with their hard-earned foreign currency at the rates the RBZ was paying so supply has been on a sharp decline leading to the central bank struggling to find money to pay those who had won bids. What was supposed to be a two day settlement period grew to an almost 5 month settlement period.
Then there is also the fact that a lot of businesses have been either disqualified or simply stopped bothering to apply. Why bother to apply when your bid was probably not going to win? And in the event that you won, you would still not be able to get the foreign currency anyway thanks to the backlog. Most businesses simply switched to the black market. It’s hideously expensive, volatile and probably has an inflated rate but at least you get the cash and can quickly fund your business.
Auction highlights
- A Grand Total of US$6,844,827.62 was distributed through the auction during the week of Tuesday, 17 May 2022, which is US$19,999,584.59 less than the US$26,844,412.21 distributed from the last auction on Tuesday, 10 May 2022
- Officially, the Zimbabwean dollar lost value by $85.2719ZWL as it moved from $173.2685 ZWL:1 USD to $258.5404 : 1 USD
- There have been 94 main auctions and 88 SME auctions since the auction system began
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