Finance and Economic Development Minister Mthuli Ncube has said the ban on bank lending announced by President Mnangagwa at the weekend is aimed at combating indiscipline in the financial services sector driving inflation and weakening the local currency.
On Saturday, Mnangagwa announced a raft of policy measures to stabilise the exchange rate and deal with runaway inflation.
Among the measures was the ban on bank lending and the tightening of trading of shares on the Zimbabwe Stock Exchange (ZSE).
Inflation rose to 94.6 per cent in April from 76.1 per cent in March this year while the exchange rate is now roughly US$1: ZWL$400.
In an interview with ZTN, the Mint Special programme on Wednesday, 11 May, Ncube blamed the currency depreciation on rising global inflation due to the war in Ukraine and market indiscipline by local economic players. He said:
Indiscipline is something that we need to deal with and we will make sure that we enforce the measures that we have put in place to deal with this indiscipline.
These are temporary measures, what we are trying to do is to prick the speculative bubble, which has emerged in the forex market as well as in the equities market.
We have information and we know some of the perpetrators that were using banks to borrow cheap liquidity; cheap in the sense of negative real interest rates, to the speculate and take positions on the parallel market but also root some of the proceeds on to the equities market and then just keep playing around the equities and parallel markets.
So, we had to prick that bubble and this is how we decided to do it.
As I said, it (the ban on bank lending) is temporary and we will get to a point where we can loosen up and open up.
Ncube asserted that the fundamentals for a strong Zimbabwe dollar, that is, reserves of US$1 billion, strong fiscal position, tight and strong monetary policy stance and growing exports, are in place. He said:
The fundamentals for a strong currency are in place and yet we see this situation, which has to do, as I said, histories, indiscipline (and) rent-seeking behaviour, which is inherent in any situation where a population has come out of hyperinflation.