Zimbabwe unfreezes bank lending only days after policy change

Zimbabwe has lifted its ban on bank lending, the central bank has announced, more than a week after the government froze loans in a move it said was meant to stop speculation against a rapidly devaluing local currency.

The government said at the time it had started investigating unnamed speculators for taking out Zimbabwe dollar bank loans to buy foreign currency on the black market, driving the local currency’s value lower.

“The Bank wishes to advise the public that the temporary suspension of lending services by banks has been lifted with immediate effect,” the central bank said in a statement on Tuesday.

It added that only organisations being investigated for abusing loan facilities would not be allowed to borrow from banks.

Business groups had warned that the lending freeze would hurt commerce and worsen Zimbabwe’s economic crisis.

Last week, South Africa’s Tongaat Hulett suspended prepayments to sugar cane farmers, saying it relied on bank loans to fund the payments.

“We said [the lending freeze] was temporary. We have lived true to our word,” government spokesman Nick Mangwana said on Twitter.

In 2019, Zimbabwe reintroduced its currency, a decade after abandoning it in favour of foreign currencies, mainly the United States dollar. Since its return, the local currency’s value has declined from about 2.5 to the US dollar in 2019 to 285 against the greenback on the interbank market.

It trades much weaker, almost 400 to the US dollar on a thriving black market.

Analysts say it is time for the government to return to the use of the US dollar.

The lending freeze did slow the Zimbabwean dollar’s slide on the black market, although it had little effect on the official rate.

Zimbabwe, which experienced 500 billion percent hyperinflation in 2008, is currently experiencing another episode of high inflation, with year-on-year inflation rising to 96.4 percent in April from 72.7 percent in March, driven by the rapid devaluation of its currency.

The economy has also been affected by the lingering effects of the COVID-19 pandemic and Russia’s invasion of Ukraine.