The official foreign exchange rate for the United States Dollar (USD) to the Zimbabwe Dollar has now moved to US$1: ZWL$57 following the conclusion of the first day of the Reserve Bank of Zimbabwe’s new forex auction system. Before today, the official rate was at ZWL$25 for every USD.
The weighted average of ZWL$57.36 for every US dollar, will be the official exchange rate until the next auction on Tuesday. US$10.34 million was traded on Monday with the highest bid coming in at ZWL$100 while the lowest bid came in at ZWL$25.5
Zimbabwe announced that it was dropping the fixed foreign exchange rate last week when the government announced that civil servants will be getting a 50 per cent salary increment as well as a US$75 Covid-19 allowance for the next three months.
Exporters and tobacco farmers had been crying out for the Reserve Bank of Zimbabwe to drop the fixed exchange rate of US$1: ZWL$25 arguing that it was artificial and causing them to suffer major losses.
Tobacco farmers, in particular, were not happy with the rate since they are required to liquidate half their forex earnings at the official rate.
They highlighted that they were getting only 25 percent of their true value, because the rate on the streets was close to a ZWL$100.
The foreign currency auction system is expected to bring “transparency and efficiency” to currency trading and to remove arbitrage opportunities which have been partly blamed for the monetary instability currently obtaining.
Zimbabwe previously introduced a Managed Foreign Exchange Auction System in January 2004.
However, it was abandoned within a year, after the market realised RBZ was keen to control the rate, which resulted in losses for exporters.
At the time, sellers complained that they could not withdraw their offers from the auction even if unhappy with bids.