Zimbabwe bans bank loans to curb currency devaluation

Harare, May 8 (Latest) .- The president of Zimbabwe, Emmerson Mnangagwa, temporarily prohibited bank loans in a last attempt to stop the devaluation of the local currency, the Zimbabwean dollar.

“Bank lending to both the government and the corporate sector is suspended until further notice,” Mnangagwa said in a televised speech late on Saturday.

The president ordered to intensify control by the monetary authorities over financial transactions to combat what he called “criminal arbitrage behavior (financial strategy) in the economy.”

Mnangagwa warned that bank loans are “prone to abuse” in reference to some entities and individuals using the Zimbabwean dollar to buy stable currencies, fueling the fall in the value of the local currency.

As the demand for foreign currencies in the country exceeds the supply, many companies are forced to look for those currencies on the black market, raising rates and weakening the Zimbabwean dollar.

While the official exchange rate for the US dollar in the African country’s strict currency auction system is 165 local units, on the black market the exchange rate reaches between 350 and 400 Zimbabwean dollars.

Related  Dollar rises on Fed expectations, omicron fears ease

This parallel reality is reflected in supermarkets, where a liter of milk costs around 400 local dollars and a loaf of bread exceeds 340.

According to the president, however, from now on supermarkets will only be able to adjust their prices to the official exchange rate “with a maximum permitted variation of 10%”.

Opposition activists and supporters are planning a national lockdown this Monday, encouraging people to stay home to protest rising prices for basic goods and reduced purchasing power.

Teachers’ basic salary of Z$25,000, for example, went from US$250 two years ago to US$62 today.

These types of popular protests are often promoted by the opposition but tend to have little citizen support because a large part of the population cannot afford it.

The situation is increasingly seen as a repetition of the last inflation crisis unleashed in 2006, which the World Bank estimated at 231 million percent in November 2008, when it reached its highest point.

Related  Amazon employees in the US refuse to join a union for the second time

News and Images Source