Reserve Bank of Zimbabwe’s (RBZ) credit extensions to the government have declined significantly indicating a departure from the past tendencies which overwhelmed the bank.
The central bank has been criticised in the past for extending money running into billions of US dollars while pursuing quasi-fiscal activities.
This included sourcing implements and machinery for local farmers on behalf of the government.
However, the latest monthly RBZ economic review for September 2020 shows that for most of this year, credit lines to the government registered sustained declines while private sector credit increased.
“On a month-on-month basis, credit to the private sector increased by 5,39% to $49.16 billion; while net credit to the government declined by 23% to $9.17 billion, during the month under review,” the report said.
During the same period, credit to the private sector was extended to agriculture, which received 27%; manufacturing – 19%; households – 17%; distribution – 11%; and mining – 11%.
In August 2020, net credit to the government declined by 18% with increases recorded to the private sector.
In June this year, credit to the government also declined by 21%.
Economist Prosper Chitambara hailed the development saying if sustained, it will go a long way in containing money supply.
“Excess liquidity arising from continued government borrowing from the central bank has been a thorn in the economy’s flesh for a long time. Limiting credit to government will, therefore, strengthen the macro-economic stability while crowding in the private sector’s access to capital which will in turn stimulate industrial productivity,” he said.