Finance minister, Patrick Chinamasa on Wednesday said government needs $200 million to recapitalise the Reserve Bank of Zimbabwe to restore its lender-of-last-resort capacity in a bid to lower the cost of borrowing.
Zimbabwe adopted the use of multiple foreign currencies – chiefly the United States dollar and South Africa’s rand — in 2009 after its own currency was rendered worthless by hyperinflation, ruling out central bank interventions through monetary policy.
The tight liquidity conditions have resulted in high interest rates which the government hopes can be lowered by the resuscitation of an interbank market anchored by a well-capitalised central bank.
“We need to restructure the financial services sector,” Chinamasa told a meeting attended by representatives of banks and mining companies including Barclays Bank, Standard Chartered Bank, Zimplats, RioZim and Old Mutual.
He said he was under pressure from Cabinet to address the high interest rates.
“The cost of money in Zimbabwe is very high. You cannot borrow at less than 15 percent,” he said, accusing banks of putting a mark-up for non-existing country risk.
At 15 percent interest rate, borrowing in Zimbabwe is three times higher than regional rates, which average around five percent.
In January, banks signed a Memorandum of Understanding (MoU) with the central bank to cut customer service fees, but interest rates have remained high, often reaching 25 percent in some cases.
Despite the high interest rates, loans and advances from banks increased by 5.5 percent to $3.5 billion in the five months to May.
Loans to individuals accounted for 22 percent of the banking sector loans followed by services with 18 percent, manufacturing 16 percent and agriculture 15 percent.