Zimbabwe suspends bank lending to halt currency depreciation

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A street vendor poses before the launch of the new currency in Harare, Zimbabwe while issuing promissory notes. REUTERS/Philimon Bulawayo

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

The South 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 trading at 165.94 against the US dollar, has continued to slide on the black market, where it is trading between 330 and 400 against the greenback.

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The black market rate has moved from around 200 Zimbabwe dollars earlier in the year.

President Emmerson Mnangagwa on Saturday announced measures he said should stem the currency devaluation, which he said threatened Zimbabwe’s economic stability.

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

He accused unnamed speculators of borrowing Zimbabwe dollars at below-inflation rates and using the money for foreign exchange trading.

Other measures include an increased tax on foreign exchange bank transfers, higher levies on foreign exchange withdrawals over $1,000, and payment of taxes previously levied in local currency foreign exchange.

The depreciation of the black market rate of the Zimbabwe dollar, which is used for most financial transactions in the economy, has fueled inflation.

Annual inflation accelerated to 96.4% in April from 60.6% in January.

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Reporting by Nelson Banya; Adaptation by David Holmes

Our standards: The Thomson Reuters Trust Principles.

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