BY TATIRA ZWINOIRA
The TRESOR will make a provision in the new legislation codifying the use of the US dollar and local currency to allow banks to recover foreign currency loans in forex to avoid losses.
As the local currency continues to depreciate, hitting $1 for $720 on the parallel forex market in recent days from around $1 for $650 last week, borrowers are increasingly turning to dollar loans.
However, with the current framework in place, borrowers can repay foreign currency loans in local currency at prevailing auctions or interbank exchange rates.
Banks reported writedowns due to the policy.
At a news conference announcing new economic measures on Monday, Permanent Secretary for Finance and Economic Development George Guvamatanga said the Treasury would make it legally binding to refund US dollars to banks.
“Another thing we’re saying is to say if you go to banks and borrow in US dollars, you’ll have to pay back in US dollars because the banks were also very concerned about US dollar lending,” he said. declared. .
“They were concerned that you could borrow today in US dollars and in two or three years they would want to pay in local currency, thus affecting their balance sheet. So that’s another measure that we’re in the process of enshrining in the legislative framework. We didn’t have that in the previous framework we had.
Looking at the central bank’s April monthly economic review, domestic credit to the private sector rose nearly 15% to $367.18 billion from $312.32 billion in March.
In a year-over-year comparison, the increase was nearly 241% from $107.77 billion in April 2021.
“Credit to the private sector mainly benefited the agriculture and household sectors, which received 26.06% and 22.09% of total credit respectively. The manufacturing and distribution sectors also received 12.08% and 11.48% respectively,” the RBZ said.
“Credit to the private sector was largely channeled into building inventory, 32.56%; other recurrent expenses, 29.37% and fixed capital investments, 16.28%,” the report adds.
Bank says the growth is attributed to an increase in foreign currency lending.
Broad money’s annual growth to $671.37 billion in April was up from a year earlier and a month earlier by $262.08 billion and $589.09 billion, respectively. This is largely explained by increases of 263.17% and almost 241% in net claims on government and credit to the private sector, respectively, compared to the comparative period 2021.
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