An illegal foreign currency trader counts notes at a local bus station in the capital Harare, Zimbabwe, November 18, 2016. Picture taken November 18, 2016. To match Insight ZIMBABWE-MUGABE/ REUTERS/Philimon Bulawayo

Zimbabwe has lifted its ban on bank lending, the central bank announced on Tuesday, more than a week after the government froze loans in a move it said was meant to stop speculation against a rapidly devaluing local currency.

The government said at the time it had started investigating unnamed speculators of taking out Zimbabwe dollar bank loans to purchase foreign currency on the black market, driving the local currency’s value lower.

“The Bank wishes to advise the public that the temporary suspension of lending services by banks has been lifted with immediate effect,” the central bank said in a statement.

It added that only organisations being probed for abusing loan facilities would not be allowed to borrow from banks.

Business groups had warned that the lending freeze would hurt commerce and worsen Zimbabwe’s economic crisis. Last week, South Africa’s Tongaat Hulett suspended pre-payments to sugar cane farmers, saying it relied on bank loans to fund the payments.

“We said (the lending freeze) was temporary. We have lived true to our word,” government spokesperson Nick Mangwana said on Twitter.

Zimbabwe reintroduced its currency in 2019, a decade after abandoning it in favour of foreign currencies, mainly the United States dollar. Since its return, the local currency’s value has declined from around 2.5 to the U.S dollar in 2019 to 285 against the greenbank on the interbank market.

It trades much weaker, around 400 to the U.S dollar on a thriving black market.

The lending freeze did slow the Zimbabwean dollar’s slide on the black market, although it had little impact on the official rate.

Zimbabwe, which experienced 500 billion percent hyperinflation in 2008, is currently experiencing another episode of high inflation, with year-on-year inflation rising to 96.4% in April from 72.7% in March, driven by the rapid devaluation of its currency.

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