By John Mhazo
Prices of basic goods and commodities have been stable over the past three months and are expected to fall, said an Economist.
Commenting on the latest auction results, Economist and Reserve Bank of Zimbabwe (RBZ) Monetary Committee member, Eddie Cross said, the positive results on the latest foreign currency auction system were indicative of increased market confidence in the RTGS dollar.
Cross admitted that admitted that there was a growing realisation that the auction system was meeting the needs of importers, promoting price stability and a gradual decline in the prices of basic goods and commodities after the RTGS weighted average exchange rate to the USD fell from $83, 3994 to $83, 3209.
“We have seen a lot of stability in prices over the last three months and we should start to see prices falling,” he said.
Cross further said that the Interbank foreign currency auction system can do more to ensure price stability and a gradual fall in prices of basic goods and commodities if there is adequate and reliable supply of foreign currency on the market.
“…there was latitude for the exchange rate to reduce further down to as low as 4 to 1, which would result in prices and inflation drastically dropping,” he said.
However, the gap between the highest and lowest bids currently remains small. The highest bid on the main auction dropped slightly from $88 to $87, 50 while the lowest bid fell from $80 to $76.
Cross said that this could be attributed to the increased number of importers who are looking for a modest foreign currency bargain while also testing the market.
“Most importers are warming up to the Interbank foreign currency market and the number should improve as importers gain more confidence,” he said.
During the 11th auction, there were 154 bids on the main auction. Only 25 bids were invalidated as bidders missed out on RBZ requirements.
Meanwhile, the SME auction witnessed a narrower bid range from $76, 50 to $86. Only 11 out of 75 bidders were disqualified.
The auction system is now supplying 87 percent of importers’ foreign currency needs. This is largely attributed to foreign currency stability in the last three months which in turn has influenced price stability.
