President Emmerson Mnangagwa Decrees that Zimbabwe’s Banks should Cease Lending Indefinitely

The rationale appears to be that people have been borrowing money to bet against the Zimbabwe dollar. Others suspect that Mr Mnangagwa wants a scapegoat for the mess his country is in, and bashing bankers pleases voters. “It is absolute madness,” says Tendai Biti, an opposition politician and former finance minister. “Finance is the oxygen of industry. The business of banking is lending.” Banning it is unconstitutional, he adds.  Money-printing drives inflation, which saps the Zimbabwe dollar’s value. Meanwhile, Mr Mnangagwa insists on skewed exchange rates. Exporters must typically surrender 40% of their proceeds at the confiscatory official rate. A lucky few can buy these dollars for less than half what they are worth. In theory, they go to importers of essential things such as fuel, medicine and farm supplies. But a fat chunk goes to well-connected types. A local parliamentary report in 2019 found that $3bn disbursed for a government agriculture programme was not properly accounted for. Another report by The Sentry, a watchdog in Washington, dc, detailed how one of the prime movers of that programme, a crony of the president, had amassed a fortune from privileged access to hard currency and state contracts.

SOURCE: THE ECONOMIST