Banks to review deposit interest rates Finance and Economic Development Minister Professor Mthuli Ncube (left) addresses journalists in Harare yesterday while Reserve Bank of Zimbabwe Governor Dr John Mangudya listens — Picture : Kudakwashe Hunda.

Martin Kadzere Senior Business Reporter
Banks have agreed to review deposit interest rates upwards to encourage savings from the banking public, but implored the need for a stable domestic currency.

While banks and the Reserve of Zimbabwe (RBZ) agreed on Tuesday on the need to raise deposit rates, this would not achieve much in the absence of a stable currency, Bankers Association of Zimbabwe president Mr Webster Rusere said yesterday.

“Yes, the rates can be attractive but equally important is a stable currency,” said Mr Rusere.

RBZ governor Dr John Mangudya told journalists yesterday that the meeting between the central bank and banks resolved interest rates should be increased to encourage savings.

“Yesterday (Tuesday) we met with the banks (and) agreed that they are going to be reviewing the deposit interest rates.

“We are quite happy that the banks have agreed to do so.

“There is commitment to ensure that it is done immediately,” said Dr Mangudya.

Total banking sector deposits amounted to $34,5 billion as at 31 December 2019, an increase of 103,66 percent from $16,92 billion as at 30 June 2019, according to RBZ.

The increase is attributable to rise in demand and foreign currency denominated deposits.

Demand deposits, which are largely transitory in nature accounted for 60 percent to total deposits. Due to loss of confidence in the domestic currency, which has lost about 74 percent of its value since February last year when authorities liberalised the exchange rate, people prefer to keep their money in hard currency. Analysts say the present economic fundamentals do not incentivise savings considering negative real rates on interests which are huge disincentive to those intending to save.

“The issue is as long as we have excessive inflation, unstable currency, there is no way one would be motivated to leave his or her local money in the bank,” Brains Muchemwa, economic analyst and chief executive of Oxlink Capital said in an interview yesterday.

“Equally, any attempt to harness USD savings at a time the exchange control regulations and currency regime do not confer full property rights to holders of forex on demand will not achieve much.”

The Government yesterday announced it had set up a task-force to implement a package of policy measures meant to stabilise the exchange rate and reduce inflation.

Finance and Economic Development Minister professor Mthuli Ncube, said the task-force will be spearheaded by his ministry and the RBZ and will include members of the Monetary Policy Committee (MPC) and Presidential Advisory Council (PAC).

The policy measures to be implemented by the task-force include foreign exchange management, introduction of managed exchange rate system as well as support measures relating to money supply, liquidity management and interest rates.

This comes against the backdrop of exchange rate volatility which has seen the local currency trading 40 to the US dollar on the parallel market, leading to price hikes and inflation increase.

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