By Alois Vinga
THE Reserve Bank of Zimbabwe (RBZ) on Monday hiked interest rates from 80% to 200% in a bid to block cheaper speculative borrowing which has adverse effects on exchange rates.
The developments come shortly after investigations by the central bank’s Financial Intelligence Unit (FIU) revealed that some corporates were manipulating the loans systems resulting in double dipping by getting multiple loans for similar purposes across the banks.
In turn, these companies would restock and later resale their commodities at prices much higher than the lending rates, in the process manipulating the exchange rates.
But presenting the MPC’s recent measures RBZ governor John Mangudya said a resolution to increase interests was passed.
“The MPC therefore resolved to put in place the following measures to align the interest rates with the inflation developments by increasing the Bank policy rate from 80% to 200% per annum.The Medium Term Accommodation interest rate has been increased from 50% to 100% per annum,” he said.
This means that interest on loans extended by banks will attract an interest rate that will be higher than 200%. This is opposed to the previous rates which were lower than inflation rates and prompted speculators to borrow and repay loans after the local currency’s depreciation.
While some market analysts have criticised the lending rates as being too high globally, monetary authorities contend that there is a need to rein in some unscrupulous activities by some companies which are abusing loopholes in the economy for self-benefit which impoverishes the majority of citizens.
The committee increased the minimum deposit rate for ZW$ savings from the current 12,5% to 40% per annum and increased the rate for ZW$ time deposits from 25% to 80% per annum.
Statutory reserves were maintained at the current levels of 10% for demand and call deposits and 2,5% for savings and time deposits.
Current export retention thresholds across the various sectors of the economy were maintained and that 25% of the unutilised export receipts shall be liquidated at the willing-buyer willing-seller exchange rate after 120 days from the date of receipt of the export proceeds.
The MPC also introduced gold coins whose operationalisation is yet to be announced.However market watchers have predicted that the transacting public will be able to purchase these coins and invest in them for interest benefits and value storage.