The Reserve Bank of Zimbabwe (RBZ) has removed an order by President Emmerson Mnangagwa suspending banks from lending local currency or foreign currency after the decree failed to arrest the skyrocketing inflation.
Mnangagwa’s decision on 9 May 2022 to suspend banks from lending in an effort to contain inflation had worsened the problem as prices of basic commodities spiked.
Big companies in agriculture had also withdrawn credit line facilities as the economy nose-dived. Economists, banks, politicians and social activists had also warned the government that the ban on lending would cause a catastrophic impact on the already struggling economy.
The RBZ on Tuesday admitted failure and removed the policy suspending banks from lending.
“Further to the circular the Reserve Bank of Zimbabwe (the Bank) issued to banks on 9 May 2022, the Bank wishes to advise the public that the temporary suspension of lending services by banks has been lifted with immediate effect,” read the statement by RBZ Governor John Mangudya.
“The lifting of the suspension does not apply to those entities that are 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.”
Renowned economist Tinashe Murapata questioned why the RBZ removed the decision when it was initially implemented by the President himself. He said this would lead to huge borrowing.
“I wonder why it’s not the president lifting the suspension? I wonder why the president was made to suspend lending?
“Once introduced to a market, systemic risk cannot be easily suspended.
“Expect an avalanche of borrowings since it’s not clear when it will be suspended again,” he said.
The latest RBZ decision came after a cocktail of measures to complement Mnangagwa’s decree had seemingly failed.
Yesterday the RBZ issued a statement authorising the Zimbabwe Revenue Authority (ZIMRA) to suspend duty on the following products for a period of 6 months from today; Rice, Flour, Cooking Oil, Margarine, Salt, Sugar, Maize meal, Milk Powder, Infants Milk Formula, Tea, Petroleum Jelly, Toothpaste, Bath Soap, Laundry Bar and Washing Powder.
Murapata said suspension of import tariffs meant the government of Zimbabwe was supporting the use of the USD. This was after Buy Zimbabwe had issued a statement claiming the move would cripple local businesses.
“The best decision government of Zimbabwe has made is accepting the greater use of USD and suspension of import tariffs. It’s quite unfortunate that BUY Zimbabwe doesn’t understand its mandate.
“There is massive food shortages in the country and high inflation is an enemy to production.
“This creates huge arbitrage for cross border smuggling of basic commodities with added corruption costs that the consumer must bear.
“By opening up the market MOF is actually stopping the unnecessary smuggling and corruption. The consumer is the main beneficiary,” Murapata said.