INDUSTRIALISTS have appealed to the Reserve Bank of Zimbabwe (RBZ) to relax the foreign currency auction system so that it enhances exporter viability to reduce parallel market activities
They have mooted three options: the quick convergence, gradual convergence and additional incentives which have been submitted to the central bank for consideration.
Under the quick convergence scheme, industrialists want the elimination of the fixed exchange rate of $824 against the United States dollar and to move towards the free auction.
In a free auction that industrialists are lobbying for, the price will not be controlled. This could however result in the exchange rate moving sharply from the current $5 600 against the greenback to around $10 000.
Business leaders have said the quick convergence will result in the elimination of distortions in the exchange rate and add to the credibility of the auction system.
The gradual convergence system entails the use of the “crawling peg” to manage the auction rate towards a rate that will bring supply and demand into equilibrium.
The gradual convergence would lead to the liberalisation of the Tuesday auction which will become a free auction.
Currently the auction is held twice a week on Tuesday and Thursday. Liberalising the auction would effectively mean the country continues to operate a two-tier exchange rate system with the Thursday auction being the country’s official exchange rate, since the Tuesday auction would be operating on a higher rate.
The gradual convergence system will entail a new floor price of between $7 000-$7 500 to the greenback which would apply to both importers and exporters.
The suggested rate is above the highest diaspora rate of $6 200.
Industrialists are also lobbying that a special incentive be paid to exporters who sell to the auction. The incentives would be financed by profits made by the central bank from the Tuesday auction.
Officials said with additional incentives, the diaspora rate could be reviewed to $7 000 to the US dollar. This has to be supported by the increase in the free on board export incentive scheme.
The Reserve Bank of Zimbabwe introduced the controlled auctionsystem on January 12 last year after accepting suggestions from the Confederation of Zimbabwe Industries.
The central bank is expected to announce its first monetary policy for 2005 next week, where industrialists are hoping that their suggestions will be taken on board.