By Amanda Mavhaza
The adoption of the foreign exchange auction system is now paying dividends as the Zimbabwe dollar continues to enjoy relative stability.
It is trading at 81.34 to the United States dollar.
The stability has already resulted in increased demand for the local currency.
Before the adoption of the auction system by RBZ the market rate had continued to increase resulting in holders of foreign currency withholding their money as the official rate had become sub-economic.
The auction has managed to improve the availability of foreign currency. In the past, the supply of foreign currency was from exports, diaspora domestic remittances and investment but now these streams are being supplemented by the domestic generation of foreign currency.
Illegal money changers are now experiencing scarcity of all forms of local money, which was weighing heavily on their business, the local dollar has reached stability at US$1:ZW81.34 this week, having maintained a firming position in recent weeks from the highest level to date of ZW83,39 on August 25.
Meanwhile, Launching the 2021 Budget Strategy paper, Finance and Economic Development Minister Professor Mthuli Ncube has said next year, the economy is predicted to recover from a projected contraction of -4,5 percent in 2020 to a growth of 7,4 percent, driven by consumption (2,6 percent) and investment (5,8 percent) improvements.
Launching the 2021 Budget Strategy Paper, he said, “The document is expected to guide wider consultations on the upcoming 2021 National Budget and employers including Government will continue to review wages and salaries in line with inflation developments and budget capacity to restore eroded incomes as the economy recovers.”
The stabilisation programme was designed to sort out the major structural fiscal and monetary problems inherited by the Second Republic, with success now seen in stable market-driven exchange rates and resulting low monthly inflation,” he said
Public investments is expected to contribute 5,1 percent to the Gross Domestic Product (GDP) growth next year with the Government pushing completion of projects that stalled this year. From the production side, he said all sectors of the economy were expected to register positive growth, with the agriculture and mining sectors expected to record the highest growth rates of about 11 percent each, tourism (6.8 percent) and energy (10 percent) among the major sectors.
With 16 auctions having been conducted to date and a total amount of US$291 million having been allotted, the Apex Bank is pleased that the foreign exchange auction has managed to improve the much-needed availability of foreign exchange for in the past the supply of foreign currency was from exports, diaspora domestic remittances and investment but now these streams are being supplemented by the domestic generation of foreign currency.
The 2021 Budget Strategy Paper marks the transition from the Transitional Stabilisation Programme, which is coming to an end this December, paving way for the longer term National Development Strategy from 2021-2025.