Zimbabwe’s President Emmerson Mnangagwa has imposed capital control to stem currency depreciation. The country has become Africa’s worst-performing currency after the Zimbabwean dollar lost half of its value in the current year.
In a televised speech Mnangagwa ordered all the banks in the country to stop lending with immediate effect to minimise the creation of broad money that is prone to manipulate or abuse the exchange rate. He said, “Banks shall with immediate effect and not process third-party country foreign payments. Third-party foreign payments are susceptible to illicit financial flows which prejudice the country of its hard-earned foreign currency resources”.
The new measures were taken to support the currency amid the growing threat of the economy dollar mining for the second time since 2009. Back then the nation officially turned to the U.S. dollars after hyperinflation soared.
Additionally, these new measures reverse the administration’s tendency to favour the US dollar, which undermined the local currency reintroduced in February 2019. The payment for state employees’ salaries, Covid-19 allowances, and annual bonuses was paid in U.S. dollars last year.
The largest insurer in the country Old Mutual warned earlier in its quarterly economic brief that the dollarization is inevitable to stabilize prices. In April the inflation soared to 96.4% from 72.7%.