Zimbabwe halts bank lending in attempt to halt currency decline

A street vendor poses as he displays bonds, ahead of the introduction of a new currency in Harare, Zimbabwe, November 11, 2019. REUTERS/Philimon Bulawayo

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HARARE, May 7 (Reuters) – The Zimbabwean government on Saturday ordered banks to stop lending with immediate effect in a move Harare said was aimed at halting speculation against the Zimbabwean dollar and was part of a series of measures to stop its rapid devaluation on the black dollar. market.

The southern African country reintroduced a local currency in 2019 after abandoning it in 2009 when it was hit by hyperinflation.

However, the Zimbabwean dollar, which is officially quoted at 165.94 against the US dollar, continued to slide on the black market, where it trades between 330 and 400 for a greenback.

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The black market exchange rate rose from around 200 Zimbabwean dollars at the start of the year.

President Emmerson Mnangagwa on Saturday announced measures meant to halt the depreciation of the currency, which he said threatened Zimbabwe’s economic stability.

“Bank lending to government and the private sector is suspended with immediate effect, until further notice,” Mnangagwa said in a statement.

He accused anonymous speculators of borrowing Zimbabwean dollars at interest rates below inflation and using the money to trade currencies.

Other measures include increasing the tax on foreign currency bank transfers, higher levies on foreign currency cash withdrawals over $1,000, and paying taxes that were previously charged in foreign currency in local currency.

The devaluation of the black market exchange rate of the Zimbabwean dollar, which is used in most financial transactions in the economy, has pushed up inflation.

Year-on-year inflation accelerated to 96.4% in April from 60.6% in January.

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Reporting by Nelson Banya; Editing by David Holmes

Our standards: The Thomson Reuters Trust Principles.

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