US$ denominated loans extended by the local banking sector constituted 94% on the back of an eight-fold increase of total loan advances, the Reserve Bank of Zimbabwe (RBZ) Mid- Term Monetary Policy Statement (MPS) review has established.

The blueprint commended the role being played by the banking sector in the development of the economy through financial support extended to private companies.

"Aggregate banking sector loans and advances increased by 7,9 times from $1,29 trillion as at 31 December 2022 to $10,19 trillion as at 30 June 2023. The increase was largely attributed to an increase in foreign currency-denominated loans, which constituted 94% of the sector's loan book," the MPS said.

The total loans to total deposit ratio for the banking sector remained relatively stable at 55% as at 30 June 2023 from 55.67% at the end of 2022.

"The foreign currency loans to foreign currency deposits ratio was 60% during the same period. The banking institutions continued to contribute to economic recovery and growth by channeling resources to the productive sectors of the economy," said the report.

Loans extended to the productive sectors constituted 77,6%, Consumptive Loans 12%, Other 10,2% of total loans as at 30 June 2023.

Agricultural, Mining and Distribution chewed up a huge chunk of the loans during the period.

The aggregate non-performing ratio (NPL) of 3,62% as at 30 June 2023 was within the Bank's risk appetite, as well as the internationally acceptable threshold of 5%.

The ratio increased from 1,58% as at 31 December 2022 owing largely to revaluation effects on foreign currency denominated non-performing loans.

As at 30 June 2023, the banking sector was adequately capitalized and all banking institutions were in compliance with the prescribed tier 1 and minimum capital adequacy ratios of 8% and 12%, respectively.

The average capital adequacy and tier 1 ratios were 40,48% and 35,35%, respectively.