By Derick Tsimba
Presenting the 2021 Zimbabwe National Budget in Harare today, Minister of Finance and Economic Development, Professor Mthuli Ncube said the foreign exchange auction introduced in June 2020 managed to stabilise the exchange rate and prices of goods and services.
Prof Ncube said, “The introduction of the foreign exchange auction in June 2020 has managed to stabilise the exchange rate, which, in turn, anchored inflation expectations and slowed down the increase in prices witnessed before June 2020.
“Relative stability in the foreign exchange market, following adoption of the auction system and measures taken by Government to deal with indiscipline among economic agents; particularly the mobile money firms, have restored sanity and integrity in the financial service sector.”
The Minister also said the official exchange rate had stabilised around US$1: ZWL$81from July to November this year.
“Official exchange rate has stabilised around US$1:ZWL$81 throughout the months of July to November, while the parallel market exchange rate premium, which had risen to more than 300% when the auction was introduced has fallen to less than 10%.
“Most prices are now aligned to the official exchange rate instead of being indexed to the parallel exchange rate as was the practice before the auction system,” said the Minister.
Minister Ncube also said inflation had declined during the period under review by the 2021 budget.
“Blended year-on-year inflation, which measures the combined price changes of goods and services in both the ZWL$ and US$ declined to 249% from 376% during the same period, while blended month-on-month inflation stood at 1.4% by October 2020.
“Further consolidation of stabilisation measures in the last quarter of 2020 will see month-on-month inflation closing the year at around 2% and the respective annual inflation at around 336%,” he said.
The Harare Post has learnt in 2021, the exchange rate is expected to remain stable, supported by the auction market exchange rate system and improved supply of foreign currency as the economy and trade, pick up.
