The Reserve Bank of Zimbabwe has been conducting foreign currency auctions for the past few weeks. Auctions are held each Tuesday with a weighted average bid rate being published at the end of each Tuesday. However, the auction has some stringent rules that might preclude those seeking foreign currency from participating. We are already familiar with most of these rules including:
- The minimum bid amount is $50 000
- The forex has to be for a cause that the RBZ deems worthy
- You should not have outstanding remittances
- You shouldn’t have some un-utilised funds (not clear how much) in your accounts etc
However it seems there is another rule: you cannot take part in the auction if you are looking for foreign currency to pay off legacy debts! Never mind the debt might be due. Here is a statement from the bank on the issue:
Foreign Exchange Auction Since the inception of the Foreign Exchange Auction System on 23 June 2020, all weekly Foreign Exchange Auctions have been conducted smoothly and bids have been settled on a timely basis on Thursdays, on a T+ 2 basis as per the Foreign Exchange Auction Rules. The Foreign Exchange Auction has so far been able to achieve its main purpose of price discovery in order to reduce exchange rate volatility, stabilise prices and enhance transparency in the management of foreign exchange.
To date, a total amount of US$71.1 million has been traded on the Foreign Exchange Auction, with the number of bids increasing from 92 at the commencement on 23 June 2020 to 290 bids received on the recent Foreign Exchange Auction of 21 July 2020. Funds allotted were mainly utilised for productive sector import requirements including procurement of raw materials and packaging (US$32.1 million), machinery, plant, equipment and spares (US$18.2 million) procurement of medicines, chemicals and consumer goods (US$16.5 million) and services (US$4.3 million). Priority shall continue to be given to productive sector imports whilst service and capital payments will be restricted to no more than 20% of auction allotments.
Bids for funding legacy foreign exchange obligations and/or blocked funds will not be eligible. A payment plan to expunge blocked funds is being developed and will be advised in due course. Individuals and entities with adequately funded foreign currency accounts (domestic or foreign Nostro) are also not eligible to participate on the auction.