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RBZ Governor Orders Banks To Freeze Foreign Currency Bid Funds

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Reserve Bank of Zimbabwe (RBZ) Governor Dr John Panonetsa Mangudya has ordered banks to freeze utilisation of funds that foreign currency seekers would have used to bid for forex on the auction system after it emerged some bidders were spending the money before the auction day.

This has resulted in sharp increase in rejected bids since the central bank last month directed that all bids would be submitted through bidders’ respective banks four days before the auction date to allow the RBZ enough time to sift through the bids.

A Monetary policy committee member (MPC) and Professor said the high rejection of forex bids was due to companies submitting bids not backed by enough bank balances on the day of the auction.

The MPC member was in sync with the MPC chairman who doubles as RBZ Governor, Dr Mangudya himself, that market speculation had become rife the increase in rejected bids was deliberate to limit the number of beneficiaries.

While the bidders are submitting bids with their accounts adequately funded, some are spending the money before the auction.

“The situation currently going on is that a bidder might have funds in their account enough to fund the bid on the day of submission, but the banks are not monitoring the accounts to block use of funds to below the amount the account holder bids at the auction,” said the MPC member.

“The Exchange Control has found out that banks are allowing their clients to use funds used to bid for the auction to the extent that when the day of the auction arrives, the bank balance does not match the bid, hence the rejections,” he added.

RBZ Governor Dr Mangudya had since advised banks to block bid funds.

Mangudya echoed similar sentiments that “This now shows lack of due diligence by the banks, and customers trying to exploit the system. Sometimes you should look at business behaviour and stop pointing fingers at the authorities. As private sector, they should also complement the efforts of authorities and not always want to be whipped into line.”

While the auction system has led to significant improvement in access to foreign currency, it was taking too long for successful bidders to receive their allocations.

Other market experts say while the decision to freeze funds used to bid for forex was a noble idea, it must be accompanied by spot disbursements of the foreign currency for successful bids.

There had been an increase in applications for foreign currency on the auction system, prompting adjustments of the timelines.

Rbz Governor Dr John Mangudya introduced the auction system in June last year as a means to efficiently distribute forex.

Since the change of the bidding rules, rejected bids have sharply increased. Bids rejected at last week’s auction were 586 representing a 49,87 percent increase from a week earlier.

Despite dropping this week to 547, the figure remains high compared with average rejections before the change of the bidding rules.

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