Economist Gift Mugano Says Forex Auction System Should Be Shut Down

Top economist Professor Gift Mugano says the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system should be shut down after Finance and Economic Development Minister Mthuli Ncube announced that weekly allotments will be limited to US$5 million.

NewZimbabwe.com reported Mugano as saying the maximum of US$5 million per week allotment is a clear indication that Zimbabwe’economy has dollarised. He said:

Since Treasury didn’t budget for the payment of the 25% export retention, where is the money going to come from?

Auction allocation limited to a max of US$5m per week? That’s little? Why can’t you shut it down/.

In view of the fact that the auction system has been reduced to US$5m per week, isn’t this clear evidence that the economy has dollarised.

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Early this week, Ncube announced new measures to stabilise the economy and the Zimbabwe dollar.

Among other things, Ncube said Government agencies will “substantially” collect fees in Zimbabwe dollars and all customs duties are now payable in local currency except designated “luxury goods”.

Ncube also ordered the liquidation of export proceeds earned from exports, a move that Mugano believes will likely promote arbitrage. Said Mugano:

Promising to liquidate foreign currency retained by exporters after 90 days is going to encourage reckless or wasteful spending.

Mugano argued that the Government was inconsistent by saying on the one hand Treasury wants to promote ZWL but on another is saying duty on fuel will be strictly USD.

He, however, commended some of the economic stabilisation measures, particularly timely payments on the auction system and efforts to promote the use of ZWL. Said Mugano:

Good policy measures announced today eg reducing IMMT, implementing the real Dutch auction system (timely payment, notification of funds available in advance and selecting the highest bidder), and promoting the use of ZWL.

More: Pindula News