BY MELODY CHIKONO The central bank says the suspension of lending by banks to government and private institutions announced by President Emmerson Mnangagwa at the weekend will include micro-financial institutions.
Mnangagwa announced a raft of measures which he said were meant to restore public and investor confidence in the economy.
In order to minimise the creation of broad money, he suspended lending by banks until further notice.
In a letter to all banks and micro-financial institutions, central bank governor John Mangudya said the suspension related to all lending, whether in local or foreign currency.
“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 micro-finance institutions to the government and private sector,” Mangudya said.
“We further confirm 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, by whatever name they are called,” the central bank chief said.
With respect to pipeline transactions, Mangudya said, where all the facility terms and conditions have been met before the pronouncement, banking institutions may approach the central bank for consideration, on a case-by-case basis.
He, however, said the suspension of lending did not apply to offshore drawdowns. “The reserve bank will monitor compliance with the above directive and will take appropriate supervisory action against any non-compliant institutions,” he said.
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While government intends to minimise the creation of broad money by suspending bank lending to both the government and the private sector, the market has not embraced the measure.
On Monday, the Zimbabwe National Chamber of Commerce called for sanity on the market.
Yesterday, FBC Securities said in its macro-economic measures analysis paper that restricting the flow of funds to the country’s productive sectors would likely be detrimental to economic performance by limiting the availability of financial resources for working capital requirements.
It said this would also limit inputs procurement and expansionary projects.
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