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Zimbabwe: RBZ Moves to Clear Us$1,7 Billion Forex Backlog - AllAfrica.com

THE Reserve Bank of Zimbabwe (RBZ) is moving to clear a US$1,7 billion foreign currency backlog which has been blamed for retarding progress in the manufacturing sector.

This follows reports that the central bank's foreign currency system is overwhelmed as it struggles with growing demand, leading to a two-month backlog.

But RBZ Governor John Mangudya, in his Mid-Term Monetary Policy Statement Thursday said the bank has now built enough reserves to clear the backlog.

The delays have been between two weeks to 13.

"The Bank has put in place measures to deal with the residual foreign exchange auction allotment backlog, utilisation of the existing letters of credit facilities for the importation of strategic commodities and capital goods in order to lessen the demand on the FEAS," said Mangudya.

"These measures include: supporting banks to promote financial intermediation to leverage on the current long foreign exchange position of around US$1,7 billion in the banking system, working closely with Government to ensure that some of the foreign exchange balances in the Exchequer Account are utilised to expunge the backlog," Mangudya said.

The forex auction system was introduced in 2019 to stabilise the RTGS dollar to US dollar rate which threatened to get out of control.

Mangudya also said the bank was working on modalities to address the gap between the official and parallel market exchange rates.

"The Bank is addressing the gap between the official and parallel exchange rates through tightening money supply, expunging the foreign exchange allotment backlog, increasing the attractiveness of the local currency so that the local currency complements rather than competes with the USD, discouraging rent-seeking behaviour and promote 47 sustainable behaviour and fair play in the foreign exchange market and provision of forward guidance to anchor exchange rate expectations and enhance business sentiment," he said.

Mangudya said the FEAS will be maintained as it had had a significant impact on stabilisatiomn of Zimbabwe's volatile economy.

"The Bank is satisfied with the achievements of the Foreign Exchange Auction System which have had a significant impact on the economy over the year it has been in operation. The Bank is thus continuing with the Foreign Exchange Auction System and is determined to strengthen the system to ensure that it reflects economic and market fundamentals of supply and demand," he said.