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Tough Times For Industry As Gvt Caps Forex Auction At US$5 Million

Hard times lie ahead for the local industry after the government capped foreign currency allotments from the Reserve Bank of Zimbabwe (RBZ)-run auction system at US$ 5 million amid growing demand for hard currency.

There has been a substantial increase in bids for foreign currency from the auction in recent weeks with companies bemoaning increased cost of production in US dollar-terms as the economy increasingly dollarizes.

In last week’s auction, accepted bids for foreign currency were valued at US$ US$ 60.4 million by far outstripping the US$14.2 million that was available.

Yesterday, the Treasury announced wholesale measures to aid the ailing local currency which also included a US$5 million cap on the auction.

Analysts fear that the move will hit hard on local firms that were already struggling to source sufficient foreign currency for production purposes.

“Auction allocation limited to a max of US$5m per week? That little? Why can’t you shut it down?,” said economic analyst, Professor Gift Mugano.

Authorities are seemingly in panic mode after the exchange rate market went haywire last week pushing the price of goods up in Zimbabwe dollar terms.

Authorities have been accusing businesses of abusing the auction system by not utilizing funds towards purported purposes.

Other measures put out by the Treasury include government agencies collecting fees in ZWL, all customs duties  payable in local currency except designated ‘luxury goods’ and the liquidation of all the foreign currency earned through exports which remain unused for a period of 90 days among other measures.

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