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Parliament barking up wrong tree on auction system

guest column :Tim Rainhard AN all too familiar joke that has been doing the rounds ever since Zimbabwe’s economy hit turbulence is that every citizen of this country has become an economist of sorts. This places the burden of filtering inferior suggestions on the advice-taker. The Chicago Sun-Times once created an advice column that ran under the pen name Ask Ann Landers which, in one of its instalments, advised thus; “Know when to tune out, if you listen to too much advice you may wind up making other people’s mistakes.” After reading an odd article in one of the local dailies in which Parliament was advising the Reserve Bank of Zimbabwe (RBZ) to hold foreign currency auctions daily rather than weekly, I was reminded of this column which used to appear in the flagship paper of the Sun-Times Media Group, which has the second largest circulation among Chicago newspapers. In that article, Parliament advised the RBZ to increase the frequency of auctions to daily after successfully getting it off the ground. “Lessons can be drawn from Angola, which started with weekly auctions and gradually gravitated to three times a week before increasing to daily auctions,” Parliament was quoted as saying in its 2020 mid-year monetary policy review. “Effective implementation is key to success. Supply side interventions are now critical to ensure uninterrupted forex (foreign currency) supply. The mistakes of 2004, where the auction system degenerated into an allocation system, should be avoided. Interference with the market mechanism and monetary indiscipline lead to inefficiencies that will cause the total collapse of the auction system as well as failure to defend the local currency.” The report went on to state that the monetary authorities should worry about stability of the exchange rate and not about the value, before appearing to contradict itself by saying “exchange rate stability will be achieved when economic agents perceive the local currency as a store of value”. Parliament, which rarely comments on monetary policy, said there is need to decentralise the auction system so that it can be managed by commercial banks, while allowing the gap between the auction rate and parallel rate to close so as to encourage forex liquidation in the formal market. '….The central bank must ensure that winning bidders on the auction market get their foreign currency on time to squeeze out the parallel market,' opined Parliament, which is often accused of lacking depth and quality expected of an institution that should not only be exercising oversight over the Executive but crafting laws for the country. But in spite of its shortcomings, the National Assembly could not resist the temptation of giving advice to the monetary authorities; after all every citizen of this country is now an “economist”. Because Parliament is no ordinary body, its advice cannot be brushed aside. Beyond everything, this is an arm of the State with four main functions, namely making laws (legislation); representation (acting on behalf of citizens); scrutiny (examining t

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