Tawanda Musarurwa Senior Business Reporter

Business has called on the country’s monetary authorities to revise the interest rate from the current 35 percent to 20 percent to help economic players cope with the effects of the coronavirus (Covid-19) pandemic.

Earlier in January Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya, maintained the key overnight bank accommodation rate at 35 percent.

Experts maintain that interest rate policy changes tend to have a direct impact on operating costs and investments of companies and financial institutions.

To this extent, the Zimbabwe National Chamber of Commerce (ZNCC), believes that the central bank should intervene to reduce the interest rate as a Covid-19 response measure as it will allow firms more scope for short-term borrowing.

“Interest rates must be lowered to 20 percent from 35 percent and loans must be restructured so as to allow businesses to recover,” said the ZNCC on behalf of its members.

Business also wants flexibility in loan restructuring — through a repeal of Statutory Instrument 65A of 2020, which mandates interest on deposits — as this will allow companies room to recover.

The prescribed interest rates for these deposits are 50 percent of the Treasury Bill yield for amounts with a duration of fewer than 30 days, which amounts to 7 percent per annum.

On amounts with duration over 30 days the interest will be 75 percent of Treasury Bill yield, which is 10,5 percent per annum.

SI-65A was promulgated earlier in March.

“Loan restructuring will entail review and relaxation of regulatory guidelines and benchmarks.

“SI-65A, which provides for payment of interest on demand and call deposits and funds in mobile wallets or trust accounts at interest rate linked to Treasury Bill (TB) rate of respective tenor, should be repealed given that it increases the cost of funds for banks, which will be passed on to borrowers through higher lending rates,” said the body.

Last June Zimbabwe’s monetary authorities hiked the overnight accommodation rate from 15 to 50 and then to 70 percent in September in a move to discourage speculative borrowing and protect the value of the Zimbabwe dollar following its floating on the interbank market for the first time since 2009.

In November, the central bank reduced the bank rate from 70 percent to 35 percent as part of its efforts to promote lending to productive sectors.

Businesses say at 35 percent, the bank rate is still rather steep for short-term borrowing.