So in other countries when the authorities want to get a handle on the lending system they use the normal fiscal and monetary tools at their disposal. They simply increase interest rates in order to dissuade people from borrowing. In Zimbabwe, countless interest hikes have failed to stem the lending tide thanks to arbitrage opportunities that exist in the economy. It seems the Zimbabwean government is not giving up, instead of restricting themselves to dissuading lending they have simply decided to ban banks from lending. You are reading this right, banks which count giving out loans as one of their primary activities can no longer lend money.
In order to minimise the creatio n of broad money that is prone to abuse for purposes of manipulating the exchange rate for financial gains, and to allow current investigations, lending by banks to both the government and private sector is hereby suspended with immidiate effect, until furhter notice.Part of the President’s speech on solving the current economic crisis
To be fair this sounds like a temporary solution but then again this is Zimbabwe. Kombis were temporarily banned during the first lockdown in 2020 and it took over two years for the government to relent and lift than ban which was done in the same speech. Temporary things have a way of becoming permanent.
It is also not clear what kind of lending is being banned here. Does it apply to mortgaging and asset financing or not? Does this apply to overnight lending. From the speech we cannot see the word individuals here so the assumption can be that only institutional lending is not allowed and private individuals can go ahead and apply for school fees loans and mortgages not that much lending is going on in this sector to begin with.
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