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Domestic credit extended to companies, entities up 80%

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By Alois Vinga


DOMESTIC credit extended to local companies and other entities increased 80,2% in the month of September 2022 in the face of high interest rates headwinds, Reserve Bank Zimbabwe (RBZ) latest data has revealed.

In the year’s first half, the RBZ hiked interest rates by 200% in a bid to block speculative borrowing whose proceeds were later used to oil parallel market foreign currency dealings which later fuelled exchange rate depreciation.

The developments triggered an outcry from some sections of industry who criticised the move, arguing that it would choke productive borrowing and disrupt the improvement in capacity utilisation.

But contrary to the trends, latest RBZ data proves that credit extensions have remained on the rise against the backdrop of improving capacity utilisation.

“Domestic credit registered a quarter-on-quarter growth of 80%, from ZW$768 billion in June 2022 to ZW$1 371.02 billion in September 2022 driven by increases of ZW$360.14 billion in credit to the private sector.

“Net claims on government of ZW$165,42 billion (158.04%); and public non-financial enterprises, ZW$8,65 billion as well as Net credit to the government included the accounting treatment of drawdowns on Special Drawing Rights (SDRs) reserves by the government,” RBZ data said.

Credit to the private sector mainly benefited the agriculture and household sectors, which received 24,5% and 19 % of the total credit, respectively.

“The distribution and manufacturing sectors received 14 % and 12% respectively. Credit to the private sector was largely channelled towards inventory build-up, 35.49%; other recurrent expenditures, 31 %; and fixed capital investments, 16%,” said RBZ.

The developments coincide with the Zimbabwe National Chamber of Commerce (ZNCC) recent study titled State of the Industry and Commerce Survey 2022 which established that capacity utilisation in industry and business rose to 63% sustaining an upwards trajectory from the preceding years.

This was a huge leap from the figure of 45,5% recorded in a comparative period last year.