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The Zimbabwe dollar bucked its official exchange rate with the US greenback and edged closer to prevailing parallel market rates yesterday, on the opening day of a controlled auction system for foreign exchange.

The auction system, introduced by the central bank in a bid to narrow extreme differences between the official and parallel rates with the US dollar, traded at an average of 4 196,58 Zimbabwe dollars throughout the day.

The highest bid rate stood at 4 900 dollars to the US dollar, with the lowest standing at 4 000.

The objective of the auctions is to improve foreign exchange inflows to the official market and, eventually, to wipe out the parallel market, which has been blamed in part for skyrocketing inflation, currently at over 600%, in the southern African country.

The US dollar, which had peaked at 6 000 Zimbabwe dollars in December on the parallel market while stuck at 800 at the official rate, plunged this month to between 3 000 and 5 000.

Under the new system, exporters are allowed to trade 25% of their foreign currency earnings at the auction supervised by the central bank.

Another 25% is to be "surrendered to the Reserve Bank, at the current (official) exchange rate of 824/US dollar.

The remaining 50% will be retained in the exporter's account, but for a maximum of just 21 days.

Zimbabwe has in recent years experienced an acute shortage of foreign currency.

Struck with the crisis, the government has been unable to service foreign debts and import adequate vital commodities such as fuel, food and medicines.

Tobacco and tourism, the traditional top foreign currency earners, have in recent years failed to perform up to expected standards due to a controversial land reform programme and political tensions.

Zimbabwe is currently in the throes of its worst economic crisis since independence from Britain in 1980, with unemployment standing at 70%, inflation at 625% and poverty levels hovering around 80% of the population. – Sapa.

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