RBZ colludes with ED, enforces illegal decree banning banks from lending
The Reserve Bank of Zimbabwe (RBZ) is being accused of breaking the law by endorsing President Emmerson Mnangagwa’s “illegal” decree of banning banks from lending.
In an effort to arrest the skyrocketing inflation in Zimbabwe, Mnangagwa last Saturday announced a raft of measures including that of suspending banks from lending local currency or foreign currency, to government and the private sector, including corporates, other legal entities and individuals.
This comes at a time when the Zimbabwean dollar officially quoted at 165.94 against the U.S. dollar, while it continues to slide on the black market, where it is trading at more than 450 to the greenback.
“Lending by banks to both the government and the private sector is hereby suspended with immediate effect, until further notice,” Mnangagwa said in a statement.
The central bank in a statement on Monday described the latest development as a “Presidential Announcement”.
“We refer to the National Announcement of 7 May 2022, made by the President of the Republic of Zimbabwe, His Excellency Dr. E. D. Mnangagwa, on Measures to Restore Confidence, Preserve Value and Restore Macroeconomic Stability, and the subsequent meeting of representatives of the banking sector with the Governor held on 9 May 2022.
“We bring your attention to paragraph 40 of the Presidential Announcement on the suspension of lending by banking institutions, building societies, development finance institutions, deposit-taking and credit-only microfinance institutions to the Government and private sector.
“For the avoidance of doubt, this suspension relates to all lending, whether local currency or foreign currency, to Government and the private sector, including corporates, other legal entities and individuals,” read the statement.
RBZ further said it “will monitor compliance with the above directive and will take appropriate supervisory action against any non-compliant institutions.”
But lawyers have slammed the central bank’s position saying its description of Mnangagwa’s decree as “Presidential Announcement” was illegal.
UK based law expert Alex Magaisa said:
“This is a shameful document by Zimbabwe’s central bank RBZ. Since it knows the decree has no legal foundation it distances itself by calling it a “Presidential Announcement”. There’s no legal instrument under Zimbabwe’s laws called a ‘Presidential Announcement’.
“He could have used the Presidential Powers (Temporary Measures) Act even if that would still be controversial. But no, he couldn’t be bothered. And here the central bank colludes in the law breaking by purporting to enforce the illegal decree. But the pliant banks will oblige,” he said.
Harare based lawyer Obey Shava noted the decree had no legal basis.
“I understand that currently, there’s no law giving effect to the President’s National announcement of 7 May 2022. Banks are not legally obliged to act upon this RBZ directive. In case I missed it, kindly help Nick Mangwana,” Shava argued.
Former Finance Minister and top lawyer Tendai Biti vowed to drag the Zanu-PF regime to court for “unlawfully banning banks from lending”.
“We now await the legal instruments necessary to effect the above measures. Save to say that massive litigation is inevitable. For instance it is blatantly unlawful to ban banks from lending when it is their core business. The new taxes and proposed civil penalties are unlawful,” he said.