Banks Suspend US Dollar Loans
Local financial institutions have suspended lending in United States dollars following uncertainty around the use of the multicurrency system beyond 2025, reported Business Weekly.
As a result, some local companies have reportedly shelved their expansion projects or retooling initiatives.
President Emmerson Mnangagwa is on record saying the country will ditch the multicurrency regime and revert to the exclusive use of the local currency as the sole legal tender.
Addressing the 9th CEO Africa Roundtable Conference in Victoria Falls recently, Mnangagwa said:
We must bite the bullet, whether it gives us some suffering for a period, we shall proceed to have our own currency, not a situation where the economy has a regime of currencies in use, we want a single currency and we are going there.
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In June 2022, the Government promulgated Statutory Instrument 118A of 2022, also known as the Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations, 2022, amending the Exchange Control Act.
The Statutory Instrument entrenched into law the multi-currency regime for the entire period of the National Development Strategy 1 (NDS1), a five-year economic blue-print adopted by the Government running up to 31 December 2025.
SI 118A of 2022 stipulates that all loans and other debts denominated in foreign currency are to be repaid in foreign currency likewise the loans in local currency.
Previously, borrowers were allowed to repay loans in Zimbabwe dollars at a conversion rate set by the Reserve Bank of Zimbabwe.
Finance, Economic Development and Investment Promotion Minister Mthuli Ncube, recently said the Government’s policy presently was that of a multicurrency regime.
Speaking to journalists during a virtual press conference from Morocco, Ncube said:
Therefore, beyond December 31, 2025, we are mulling over it, and we will come back on that but whatever we do, we will be sure that we are able to protect business, transactions and jobs.
The Confederation of Zimbabwe Industries (CZI) president, Kurai Macheza, said:
It is true that banks are not able to give any more new loans in US dollars. Not only that, but wherever they are getting these lines of credit, it’s also difficult to give a timeline of 2025.
So, as business, we have been talking about this to the authorities, our view is maybe let’s look at extending this to 2030 but obviously, it’s our view the authorities are considering it.
We don’t know how they are going to respond but that is our plea to the authorities we are engaging in.
Speaking to Business Weekly, an official with one of the leading financial institutions who preferred not to be named said:
Banks are no longer interested in lending businesses in US dollars because it is not clear what will happen after 2025 in terms of the continued use of the multicurrency system.
According to the Zimbabwe National Statistics Agency (Zimstat), 80 percent of bank loans in the country were in United States dollars.
The increased lending in United States dollars is attributable to the volatility of local currency and the country’s history of hyperinflation, among other factors.
However, due to the uncertainty around the continued use of a multicurrency system beyond 2025, local banks are hesitating to lend businesses in US dollars.
More: Pindula News
