Auction
Money from Diaspora boosts productive sector

Foreign currency sent from abroad to a recipient in Zimbabwe through a local Money Transfer Agency goes to the foreign currency auction.

The Foreign Exchange Auction system was introduced to enhance the efficient allocation of foreign currency to productive sectors of the economy.

According to Reserve Bank statistics 37,56 percent of the US$240,9 purchased so far at the auction has been allocated to various companies for the purchase of raw materials.

Fuel and petroleum products accounted for 16,8 percent of the allocations, while 10,9 percent of the money allocated was for equipment and machinery and 9,3 percent for spares.

Fees and subscriptions took 7,3 percent of the total allocation, motor vehicles and bicycles 4,9 percent, chemicals 3,5 percent, manufactured goods two percent, education two percent and travel 1,1 percent. Loan repayments, reimbursements and dividends each accounted for less than one percent. The remaining 2,3 percent was used for other purposes.’

The auction system is a transparent means of allocating money chiefly to the productive sector. It is proving a great success.

The Reserve Bank of Zimbabwe received more foreign currency in the first four months of this year than it did in the whole of 2003. Statistics show that from January 2 to April this year the Reserve Bank received US$437,2 million compared to US$301,7 million for the whole of 2003.

Bids are lodged through a commercial or merchant bank. Before they can be lodged, they require Reserve Bank Exchange Control approval.

Exchange Control approval is followed by prioritisation of foreign exchange in the auction to ensure that foreign currency is channelled towards the productive sectors and to avoid misallocation of scarce foreign exchange resources.

Money from Money Transfer Agencies is expected to further boost the foreign currency available to the auction and hence to the productive sector.