Zimbabwe’s treasury will put a provision in new legislation arranging the use of US dollars and the local currency to allow banks to recoup foreign currency loans in forex to prevent losses.
The local currency depreciated, reaching US$1: $720 on the parallel forex market in the past few days from about US$1:$650 last week.
Finance and Economic Development permanent secretary George Guvamatanga said the Treasury would make it legally binding for banks to be repaid US dollars.
“One other thing that we are saying is to say if you are going to go to the banks and borrow in US dollars, you will have to repay in US dollars because banks were also very much concerned about lending in US dollars,” he said.
However, with the current framework in place, borrowers can repay forex loans in local currency at the prevailing auction or interbank forex rates.
“They were worried that you could borrow today in US dollars and in two or three years from now come and want to pay in local currency thereby affecting their balance sheet. So it’s another measure that we are actually entrenching in the legislative framework. We did not have that provided in the previous framework that we had.” he added.
Meanwhile, the annual growth in broad money to $671,37 billion in April was up from a prior year and month comparative of $262,08 billion and $589,09 billion, respectively. This was largely driven by increases of 263,17% and nearly 241% in net claims on government and credit to the private sector, respectively, compared to the 2021 comparative period.