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Foreign Currency Auction Faces Imminent Collapse – Economist

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African Economic Development Strategies (AEDS) executive director Gift Mugano has warned that the RBZ Governor Dr John Mangudya introduced Foreign Currency Auction System faces imminent collapse if measures are not taken. The system had in recent months faced threats and risks due to exchange rate disparities, the renowned economist revealed.

Mugano said Zimbabwe’s auction system introduced by the Reserve Bank of Zimbabwe (RBZ) is facing an imminent collapse after which dollarisation will prevail 100%.

Addressing Parliamentarians during a 2022 pre-budget seminar, he said,

“Increase in demand for foreign currency from the auction system may worsen the disparities between the official exchange rate and parallel market rate which will render the auction system useless and total demise and hell broke loose. The regularization of citizens to buy US$50 from the Bureau de change every week has a negative effect on the Zimbabwe dollar, it looks like deepening the process of dollarization as opposed to dedollarization,” Mugano said.

“Although the auction system at its inception managed to foster economic stability, in recent months it has faced several threats and risks mainly coming on the back of exchange rate disparities, that is, approximately ZW$88/US$1 versus ZW$190/US$1. Measures in place are not sufficient to deal with the black-market rates since the root causes are centred around supply of forex (structural issues), corruption in the forex markets and the command economy,” Mugano said.

ross moyo

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