Zimbabwe central bank says bank lending freeze is temporary

  Zimbabwes freeze on bank lending is a temporary measure which is meant to contain inflation and stabilise its economy, central bank governor John Mangudya told state television on Tuesday.

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  President Emmerson Mnangagwa on Saturday ordered the suspension with immediate effect, saying the move was meant to stop speculation against the Zimbabwean dollar, which has been rapidly devalued on a thriving black market.

  “We know this is a painful, but necessary, measure. It was necessary because of the increase in inflation. Some entities were now using funds from banks to purchase foreign currency,” Mangudya told ZBC.

  “Its a temporary, necessary measure to ensure that there is sanity in terms of taming inflation.”

  Zimbabwes inflation has started to rise again, with year-on-year inflation at 96% in April, up from 61% at the beginning of the year, mainly due to a rapidly weakening local currency.

  Analysts from BancABC, the local unit of pan-African financial group Atlas Mara, said in a research note that the lending freeze threatens the survival of the countrys banks.

  “The government is using a blunt approach to try and address a long-standing currency conundrum,” the analysts said, adding: “Banning lending activities will threaten survival of Banks as this will wipe out 20-50% of their incomes.”

  The BancABC note said that the freeze could lead to shortages of goods, further price increases and job losses.

  (Reporting by Nelson Banya; Editing by Alexander Smith)

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