President Emmerson Mnangagwa has ordered banks to stop lending to the government and the private sector pending investigations among a raft of measures to stabilise the economy, following a sharp depreciation of the local currency.
This move comes as the local currency has been depreciating against the greenbacks amid high demand for the dollar which is seen as a store of value.
In a statement over the weekend, Mnangagwa said there were economic hitmen behind the exchange rate depreciation despite the existence of strong economic fundamentals.
He said the foreign currency auction backlog would be cleared by the end of May. With immediate effect all foreign currency allotments are to be settled within 14 days post auction allotment, and the auction system only allots foreigners currency that is available.
Retailers and wholesalers have been ordered to benchmark their pricing to the average interbank rate with a maximum allowable variance of 10%.
However, the move will leave the banking sector on the edge. By their nature, banks survive through lending. The core business of banks is to create credit and allocate capital efficiently. Banks also get income from non-funded streams, which are, bank and transaction charges, service fees and other services.
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