Zimbabwe suspends bank lending in bid to arrest currency decline

A road vendor poses as he shows bond notes, earlier than the introduction of latest foreign money in Harare, Zimbabwe.
REUTERS/Philimon Bulawayo

HARARE, Might 7 (Reuters) – Zimbabwe’s authorities on Saturday ordered banks to cease lending with fast impact in a transfer Harare mentioned was designed to cease hypothesis towards the Zimbabwean greenback and was a part of a raft of measures to arrest its fast devaluation on the black market.

The southern African nation reintroduced a neighborhood foreign money in 2019 after abandoning it in 2009 when it was hit by hyperinflation.

Nevertheless, the Zimbabwean greenback, which is formally quoted at 165.94 towards the U.S. greenback, has continued to slip on the black market, the place it’s buying and selling between 330 and 400 to the buck.

The black market trade price has moved from about 200 Zimbabwe {dollars} originally of the 12 months.

President Emmerson Mnangagwa on Saturday introduced measures he mentioned have been meant to arrest the foreign money’s depreciation, which he mentioned threatened Zimbabwe’s financial stability.

“Lending by banks to each the federal government and the non-public sector is hereby suspended with fast impact, till additional discover,” Mnangagwa mentioned in a press release.

He accused unnamed speculators of borrowing Zimbabwe {dollars} at below-inflation rates of interest and utilizing the cash to commerce in foreign exchange.

Different measures embody an elevated tax on foreign exchange financial institution transfers, increased levies on foreign exchange money withdrawals above $1,000, and the cost of taxes which was charged in foreign exchange in native foreign money.

The devaluation of the Zimbabwe greenback’s black market trade price, which is utilized in most monetary transactions within the financial system, has been driving up inflation.

12 months-on-year inflation quickened to 96.4% in April, from 60.6% in January.

Reporting by Nelson Banya; Modifying by David Holmes

Our Requirements: The Thomson Reuters Trust Principles.