Govt to tackle inflated interest rates –– Biti
http://www.theindependent.co.zw/
Friday, 18 May 2012 08:41
Gamma Mudarikiri
GOVERNMENT will introduce a policy framework to reduce banks’ inflated
interest rates, currently hovering between 15% and 25%, Finance minister
Tendai Biti has said.
Biti told journalists in Harare yesterday his ministry had fruitlessly
engaged the Bankers Association of Zimbabwe (BAZ) to consider lowering
lending rates, which treasury felt were far higher than international rates,
currently at around 3% on average.
“We are going to work on a framework in the coming few weeks to address the
humongous distortions of crazy lending and non-existent deposit rates. We
have tried to engage BAZ but they have produced nothing,” said Biti.
The government would soon amend the Banking Act, which would see banks
involuntarily playing “the role that a bank in Zimbabwe should be playing”.
Biti said interest rates and other bank charges had all remained at levels
which perpetuated the pre-multiple currency mindset at a time when the
country faces an acute shortage of liquidity.
He said internationally, money was being sold at 3%, but in Zimbabwe,
interest rates were as high as 30%.
“We would have no problem if deposit rates were also meaningful,” he said.
Deposit rates for demand and short-term savings accounts for the period
ranged between 0,15% to 5% per annum. Long term deposits ranged between
0,10% to 18% against lending rates as high as 30%.
Biti said there was rising concern over the absence of serious initiatives
in the mobilisation of savings in the financial sector, a development which
would see government developing market-based initiatives to attract more
savings into the formal banking sector.
He said the banking sector was reluctant to play its intermediary role of
giving credit to local businesses.
“As we speak, we have over US$700 million sitting in banks’ vaults,” he
said.
Biti said while he and Reserve Bank governor Gideon Gono had stuck their
necks out for banks in the wake of the indigenisation onslaught, they felt
that they were getting little support from them.
“These banks are operating like foreign banks being run by foreigners. They
need to act like local banks that are foreign-owned,” he said.
Biti said after the flawed land reform programme banks stopped giving
credit to agriculture –– a position which he said was no longer justified.
He said banks had the capacity to strategise and mobilise lines of credit.