Parliament’s Budget Office says banks have reduced lending to the private sector, choosing instead to de-risk by investing in secure Government instruments such as Treasury Bills.
Increased lending to Government, the Reserve Bank of Zimbabwe is on record saying, has the tendency of crowding out private sector, which negatively affects the economy.
“Banks have not been as supportive as expected as evidenced by their de-risking and reduced lending to the private sector in favour of less risky Treasury Bills,” the budget office said.
“This de-risking largely explains the increase in net credit to Government of 70,45 percent to $6,27 billion in 2017, while credit to the private sector rose by 6,97 percent to $3,71 billion.”
Parliament’s Budget Office said that overall, bank lending to local economic agents grew by 44,31 percent, from $7,55 billion in November 2016 to about $10,64 billion in November 2017. On a monthly basis, domestic credit grew by 2,32 percent, from $10,29 billion in November 2017 to $10,7 billion in December 2017.
According to the Reserve Bank of Zimbabwe’s monthly economic review report for December 2017, lending to private sector rose 5,83 percent to $3,7 billion in December 2017 from $3,5 billion in the comparative period the prior year.
On a month-on-month basis, RBZ said, credit to the private sector recorded a marginal growth of 0,67 percent, from $3,69 billion in November 2017 to $3,718 billion in December 2017.
Households took the biggest chunk of 23,40 percent; agriculture, 18,44 percent, services, 14,13 percent, distribution, 12,58 percent, manufacturing 11,57 percent, financial entities and investments 10,97 percent, mining 4,77 percent. Construction received 2,04 percent while transport and communications accounted for 1,57 percent of private sector lending. Private sector credit was utilised for inventory build-up, 28,1 percent, consumer durables, 19,1 percent, fixed capital investment, 9,7 percent and pre and post shipment financing, 1,1 percent.
Amounts channelled towards other recurrent expenditures constituted 39,1 percent of the total outstanding loans and advances, during the month under review. Meanwhile, broad money supply stood at $8,10 billion in December 2017, registering an annual growth of 43,77 percent, from $5,63 billion in the same period in December 2016.
The growth was due to increases in transferable deposits, 56,29 percent and negotiable certificates of deposits 9,13 percent. Time deposits, however, declined 4,75 percent. Bond notes and coins in circulation increased from $70,17 million in December 2016, compared to $331,94 million in December 2017. On a monthly basis, broad money increased by 1,07 percent from $8,02 billion in November 2017 to $8,10 billion in December 2017.