Zimbabwe lifts suspension on banks lending money to private companies, gov’t agencies
President of Zimbabwe, Emmerson Mnangagwa, last week issued an executive order that banks should stop extending loans to private companies and government agencies following the rapid devaluation of the Zimbabwean dollar on the black market.
The President had enforced the drastic measure to arrest the currency’s depreciation and stop “economic hitmen” who he blamed for derailing the country’s economic stability.
According to investigations by the Reserve Bank of Zimbabwe (RBZ), the so-called “economic hitmen” were accused of borrowing Zimbabwe dollars at below-inflation interest rates and using the money to trade in forex.
This led to the deterioration of the parallel market exchange rates to reach a high of US$1: 400 Zimbabwean dollars, driving up inflation to 96.4% in April, from 60.6% in January, RBZ explained.
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Following the implementation of the ban, financial experts in the country criticised the move by President Mnangagwa, saying that the implications would threaten the survival of the country’s banks.
Analysts from BancABC, the local unit of pan-African financial group Atlas Mara argued that “Banning lending activities will threaten the survival of Banks as this will wipe out 20-50% of their incomes.”
In a dramatic turn of events, the RBZ has, with immediate effect, lifted the temporary suspension of lending services by banks issued through a circular on May 9, 2022.
RBZ, in a statement, said that the lifting of the suspension excludes entities under probe by the central bank for malpractices involving loans.
“The lifting of the suspension does not apply to those entities under investigation by the Financial Intelligence Unit (FIU) for abusing loan facilities to the detriment of the economy. The FIU has accordingly advised all banks of the affected entities,” the statement reads in part.
