During the weekend the president announced that in order to arrest economic decline banks would no longer be allowed to lend money to private individuals and government departments. The order was supposed to be with immediate effect but as we noted in our early article, that is almost always never the case. The orders the president makes have to be implemented using some sort of legal instrument usually a statutory instrument or in the case of this order a bank letter. That’s right, the Reserve Bank of Zimbabwe has now issued a letter to all banks asking them to stop issuing loans. Banks are also required to get in touch with the RBZ with regards to loans that were already in the process of being issued.
9 May 2022
To: Chief Executive Officers/ Managing Directors
All Banking Institutions, Development Finance Institutions, Deposit Taking and Credit Only
RE: NEW MEASURES TO RESTORE CONFIDENCE, PRESERVE VALUE AND RESTORE
We refer to the National Announcement of 7 May 2022, made by the President of the
Republic of Zimbabwe, His Excellency Dr. E. D. Mnangagwa, on Measures to Restore
Confidence, Preserve Value and Restore Macroeconomic Stability, and the subsequent
meeting of representatives of the banking sector with the Governor held on 9 May 2022.
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 microfinance institutions to the Government and
private sector. For the avoidance of doubt, this suspension relates to all lending, whether
local currency or foreign currency, to Government and the private sector, including
corporates, other legal entities and individuals.
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.
With respect to pipeline transactions, where all the facility terms and conditions have
been met before the above pronouncement, institutions may approach the Reserve Bank
for consideration, on a case by case basis.
Please take note that the suspension of lending does 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.
We advise accordingly.The full letter from the RBZ to banks
P. T. Madamombe
Director, Bank Supervision
Agents of chaos
The government and the RBZ like to feign innocence when people blame them for our economic woes. They have time and time again unleashed ill-thought policies like this with little consideration, nuance or consulting stakeholders. Banning loans is going to bring chaos in the economy. It is very possible that banks, who are now being banned from doing what is essentially one of their core services, might also end up firing staff. The government and the RBZ have been like wrecking balls. Everytime they swing a new policy bodies fall and the economy crumbles further.