THE forex auction system introduced by the Reserve Bank of Zimbabwe in June this year to contain the black market and stabilise the economy has been a major failure and will not achieve targeted results, a former Cabinet minister has said. by BRENNA MATENDERE The forex auction, which replaced the interbank market exchange rate system, has been taking place every Tuesday with companies bidding for foreign currency and at the end of the day setting weekly official rates. However, Tapiwa Mashakada, who served as Economic Planning and Investment Promotion minister in the shortlived government of national unity, told NewsDay yesterday that the scheme would remain ineffective to deal with black market rates that have been pushing prices of basic commodities to unaffordable levels for the majority poor citizens. “From the onset, one has to ask the following questions: Who was driving parallel market rates? Why did the Interbank market fail? Is the auction system sustainable? The major players now participating at the auction system are the same players who were yesterday allegedly sourcing forex from the black market to finance raw material imports and other foreign payments,” he said. “This had transformed the parallel market into an untamed jungle with no rules, leading to runaway parallel market rates, all because there was not enough forex to allocate on the market through the forces of demand and supply. Similarly, the interbank market collapsed because demand exceeded supply at the then prevailing rates. Moreover, forex buyers used the arbitrage to offload some of the forex on the black market.” Mashakada added that the development saw the emergence of high premiums between the official and parallel market rates. “With the introduction of the auction system, the official rate rose from US$1:$57 to US$1:$83 as at August 23, 2020. In my view, it is just the official rate that has caught up with the parallel market rate. The premium still exists. For example, as at August 23, the parallel market rate was US$1:$120 compared to the official rate of US$1:$83, which means that the auction rate is a moving target. It will never catch up or be at par with the parallel market for the following reasons: Importers will supplement what they get at the auction from the parallel market in order to meet their full import requirements and the diaspora remittances are around US$150 million per month. This is money getting directly into people’s pockets. This money is liquidated on the parallel market,” he said. The opposition MDC Alliance official also pointed out that part payments to gold producers and tobacco farmers are liquidated on the black market with civil servants bonuses as well as those of embassy and non-governmental organisations staff who receive their salaries in forex will also be offloaded on the parallel market.Mashakada said the only solution to the crisis was for government to decommission the Zimbabwe dollar. “The market has dollarised. The only way to kill the black market is to fully dollarise and decommission t