The Zimbabwe National Chamber of Commerce (ZNCC) is reportdly urging the government to decentralise the foreign currency auction system. The current auction system was introduced last month and to date four auctions have been held. These auctions are held weekly and conducted by the Reserve Bank of Zimbabwe based on a set of guidelines that the central bank has carved out.
There is a need to decentralise the auction system so that it can be done by individual banks rather than the central bank because banks have better visibility and interaction with clients. Auction should be on a daily basis.
ZNCC on the issue
ZNCC has also argued that having to wait for a week before one can get foreign currency is untenable in some instances. They feel that if the process was transparently conducted at a bank level instead of the RBZ, auctions could be conducted more frequently even if these auctions might be for a small amounts.
Another interesting issue the organisation raised is the issue of the nature of the auction. Although a lot of businesses, government officials and individuals are cheerfully quoting the weekly exchange rate. In reality, the rate is meaningless as the current auction is focused on allocating foreign currency rather than setting the rate. Weekly auctions are being conducted using the Dutch Auction principle which is adequate when it comes to deciding who gets how much foreign currency but is absolutely useless when it comes to setting a rate.
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