RBZ operationalises Mnangagwa’s lending ban, experts warn move could see companies collapse

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By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) Monday moved to operationalise directives issued by President Emmerson Mnangagwa barring the extension of loans to all the private and public enterprises.

In a directive late Saturday night, Mnangagwa introduced a raft of measures he argued were aimed at containing a debilitating economic crisis underlined by an skewed exchange rate which has pushed prices of basic commodities up to astronomic levels over the past two few weeks.

The black market exchange rates which hit US$1: ZW$400 Monday

In a memo dated May 9, 2022 signed by the RBZ director for banking institutions, Phillip  Madamombe, all chief executive officers of the banking and allied sectors were ordered to operationalise the directives with immediate effect.

Madamombe said the presidential directive affected all forms of lending.

“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,” Madamombe said.

“For avoidance of doubt, this suspension relates to all lending, whether local currency and foreign currency, to government and to the private sector, including corporates, other legal entities and individuals,” he said.

He said the directive implied that no new credit facilities should be issued as the suspension covers, new loans, undrawn portions of agreed facilities, overdrafts and other forms of borrowing instruments.

“With respect to pipeline transactions, where all the facility and the conditions have been met before the above pronouncements institutions may approach the RBZ for consideration on a case by case basis,” he said.

However, lending based on offshore drawdowns were exempted from the directive.

“The Reserve Bank of Zimbabwe will monitor compliance with the above directive and will take appropriate supervisory action against any non-compliant institutions,” added Madamombe.

Sources who spoke to Monday night said the move was prompted by recent observations pointing to non-productive speculative borrowing by private sector players who are allegedly invading the markets to purchase the United States dollar await an opportune time to dispose the hard currency for huge profits

They said the move was also aimed at limiting the Zimbabwean dollar supply on the market to the extent that it is very scarce, which would ideally result in the stabilisation of the exchange rate.

They are basically reducing the Zimbabwean dollar circulation on the market, hence creating demand for it which should result in it firming,” a banker who spoke to said, adding this may have serious repercussions on companies that relied on bank loans.

“Companies that relied on bank loans will find the going tough as they may fail to meet obligations,” the banker said.