Zimbabwe again allows banks to make loans

This content was published on May 17, 2022 – 14:32

17 mayo 2022 – 14:32

Harare, May 17 (EFE) .- The central bank of Zimbabwe repealed on Tuesday a controversial order that since last May 8 prohibited commercial banks from granting loans in a last attempt to stop the devaluation of the Zimbabwean dollar.

The governor of the Central Bank, John Mangudya, announced the lifting of this prohibition “with immediate effect”, according to a statement from the institution.

However, he added, this latest movement “does not apply to those entities that are being investigated by the Financial Intelligence Unit for abusing credit facilities to the detriment of the economy” of the country.

The temporary suspension of bank loans in Zimbabwe was announced by the country’s president, Emmerson Mnangagwa, on May 8.

Mnangagwa warned that bank loans are “prone to abuse” in reference to some entities and individuals using the Zimbabwean dollar to buy stable currencies, fueling the fall in the value of the local currency.

The president’s order was heavily criticized in Zimbabwe.

The country’s main business group, the Zimbabwe National Chamber of Commerce, said such a move would scare away investors who are unwilling to put their money in countries “where bank loans can be frozen overnight.”

In addition, the measure caused damage to some companies, such as the Tongaat Hulett sugar factory, which on May 12 suspended advance payments to sugarcane producers in the southeast of the country because these transactions were made with borrowed money.

“The ban on bank loans should never have been imposed. It was a blatantly illegal, irrational and unsound decision,” opposition politician and former Finance Minister Tendai Biti criticized on his Twitter account.

Zimbabwean dollar inflation now exceeds 96%.

Due to this economic crisis, most of the citizens of this country are making great efforts to pay for basic items, the prices of which continue to rise.

While the official exchange rate for the US dollar in the strict currency auction system of the African country is 285 local units, on the black market the exchange rate is 400 Zimbabwean dollars.

As the demand for foreign currencies in the country exceeds the supply, many companies are forced to look for those currencies on the black market, raising rates and weakening the Zimbabwean dollar.

In late April, Deputy Finance Minister Clemence Chiduwa revealed that executives of 256 companies had been arrested for illegal foreign exchange transactions.

In the midst of the 2006-2008 crisis, the government issued a 100 billion Zimbabwean dollar note that was not even enough to buy a loaf of bread.

The move had limited impact and Zimbabwe ended up adopting the US dollar as its local currency from 2009 to 2016.

The Zimbabwean dollar was reintroduced in 2016, initially with two and five dollar bills. EFE

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