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Zimbabwe businesses in quandary as banks suspend US dollar

Zimbabwe businesses in quandary as banks suspend US dollar

Companies are reportedly in quandary as it emerged local financial institutions have suspended lending in United States dollars following uncertainty around the use of a multicurrency system beyond 2025, Business Weekly can reveal.

Due to the scepticism surrounding lending in US dollars, some stakeholders say many local firms are reported to have shelved their expansion projects or retooling initiatives.

In June last year, the Government promulgated Statutory Instrument 118A of 2022, also known as the Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations, 2022, amending the Exchange Control Act to address among others, issues of extension of the multi-currency regime.

The SI also entrenched into law the multi-currency regime for the entire period of the National Development Strategy 1 (NDS1), a five-year economic blue-print adopted by the Government running up to December 31, 2025.

Among others, the SI requires all loans and other debts denominated in foreign currency to be repaid in foreign currency likewise the loans in local currency.

This is a deviation from the previous practice that allowed borrowers to repay loans in Zimbabwe dollars at a conversion rate set by the Reserve Bank of Zimbabwe.

President Mnangagwa is also on record saying the country will revert to the exclusive use of the local currency as the sole legal tender and ditch the multicurrency regime as no country can develop without its own currency.

At the recently held 9th CEO Africa Roundtable Conference in Victoria Falls, President Mnangagwa said: “We must bite the bullet, whether it gives us some suffering for a period, we shall proceed to have our own currency, not a situation where the economy has a regime of currencies in use, we want a single currency and we are going there.”

Speaking to journalists during a virtual press conference from Morocco last week, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, said the Government’s policy presently was that of a multicurrency regime, where the dominant currencies are the US and Zimbabwe dollars.

“Therefore, beyond December 31, 2025, we are mulling over it, and we will come back on that but whatever we do, we will be sure that we are able to protect business, transactions and jobs,” he said.

As a result of the uncertainty around the continued use of a multicurrency system beyond 2025, local banks are reportedly hesitating to lend businesses in US dollars.

The Confederation of Zimbabwe Industries (CZI) president, Kurai Macheza, whose organisation represents the local manufacturing sector said: “It is true that banks are not able to give anymore new loans in US dollars. But not only that, wherever they are getting these lines of credit, it’s also difficult to give a timeline of 2025.

“So, as business we have been talking about this to the authorities, our view is maybe let’s look at extending this to 2030 but obviously it’s our view the authorities are considering it.

“We don’t know how they are going to respond but that is our plea to the authorities we are engaging in,” he said.

The Zimbabwe National Statistics Agency (Zimstat) has indicated that 80 percent of bank loans in the country were in US$, a significant increase from the past, when most bank loans were in local currency.

The shift to US$ loans is due to a number of factors including the volatility of local currency and the country’s history of hyperinflation.

The manufacturing sector needs US dollars to import and invest in new plant and machinery as the current equipment is antiquated and inefficient to stimulate production to competitive levels.

Recently, one of Zimbabwe’s leading manufacturers of mining and industrial equipment, Shepco Group of Industries, announced that it had embarked on a US$2 million retooling programme that was being rolled out in phases.

The programme, which aimed at improving the firm’s productivity and competitiveness, has since been suspended owing to sceptmism by local financial institutions to lend in US dollars.

Shepco Group of Industries managing director, Dr Shepherd Chawira, confirmed the slowing down of their retooling


“Progression of our retooling programme is a bit slower now because of the uncertainty around the use of the multicurrency system beyond NDS 1.

“Banks want all US dollar loans to be paid by the end of next year because they are expecting a policy change in 2025 after the expiry of NDS1. So, that has really taken us back,” he said.

A comment could not be obtained from the Bankers Association of Zimbabwe (BAZ) as the association’s chief executive officer, Fanwell Mutogo, had not responded to written questions from this publication by the time of going to print.

However, an official with one of the leading financial institutions who preferred not to be named said: “Banks are no longer interested to lend businesses in US dollars because it is not clear what will happen after 2025 in terms of the continued use of the multicurrency system.”

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