LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) should further cut borrowing costs to about 100% from the current 140% amid fears higher interest rates have increased the cost of doing business, captains of industry have warned.
The call comes after the RBZ reduced interest rate to 140% from 150%.
The Zimbabwe National Chamber of Commerce president Mike Kamungeremu told Business Times that the interest rates remain usurious for businesses.
“We appreciate the central bank’s efforts to reduce interest rates to 140% but we need them to go further down to 100%.
“When the interest rates were reduced to 150% we recommended RBZ to put it at 100% and that’s the position and we maintain that,” Kamungeremu told Business Times.
The Confederation of Zimbabwe Industries president Kurai Matsheza said: “As an industry, we welcome the decision [to reduce the interest rates]. We hope if the disinflation is sustained, then further reduction is expected sooner rather than later.”
Bankers Association of Zimbabwe president Mehluli Mpofu told Business Times the sector welcomed the rate cut but was worried that “even at 140%, businesses are not showing interest to borrow ZWL$ at that rate”.
ZB Financial Holdings finance director Emmah Mungoni said the bank policy rate remained high.
“However, we expect the interest rates to be further revised downwards to an average of 80% before year-end,” Mungoni said.
AFC Holdings Strategy and Business Development head Joseph Mverecha said there was no strong case for 140% interest rate.
“High-interest rates on ZWL$ are fuelling re-dollarisation. The authorities might think they are winning on inflation but local currency is on the verge.
“Evidence from money balances does not warrant high-interest rates in the economy and evidence from monetary aggregates does not support high-interest rates.
”The authorities should note that high-interest rates will not guarantee local currency stability,” Mverecha said.
A securities firm, IH Securities said the interest rates, although still elevated, were relative to the current inflation trajectory. The interest rate will at least provide a reprieve to current holders of debt, according to IH Securities.
“We believe that demand for ZWL$ loans at these levels will still be muted, especially in the sub-section of the population that doesn’t qualify for the Medium-term Bank Accommodation Facility.
“The central bank has however said that interest rates on local borrowings are expected to taper off to between 40-60% on condition disinflation is maintained,” IH Securities said.
High interest rates has seen a shift to the dollar loans from ZWL amid fears this would accelerate the re-dollarisation of the economy.
