ANALYSTS have questioned the recent reduction of the overnight rates by the central bank, arguing the move will not have any significant impact on the money market.
The Reserve Bank of Zimbabwe (RBZ) recently slashed the overnight rates from 205% to 189%.
African Banking Corporation managing director Vulindlela Ndlovu said the move would not have an impact on the money market.
He said this was mainly because banks had accumulated Treasury Bills and were now focusing on mopping them up.
“Many banks accumulated Treasury Bills and are mainly looking at mopping them up and because of this, it is of no consequence at this time,” Ndlovu said.
He said the move was in line with indicators as outlined by RBZ governor Gideon Gono in his monetary policy statement.
“At the back of the monetary policy statement the governor provided indicators where rates should be and this is mainly in line with this,” said Ndlovu.
He said another likely contributor to the reduction could be the drop in inflation.
Ndlovu said the current boom on the Zimbabwe Stock Exchange was mainly due to the negative interest rates persistent on the market.
The market is in excess of $26 billion.
However economist John Robertson viewed the move by the central bank as a result of the persistent shortage of funds for borrowing.
He said the borrowing rates that the RBZ had been offering had been too high and there was need to lower them.
He said the move was also meant to remove liquidity problems.
“There was a persistent shortage of funds for borrowing and I think the central bank realised this and thus reduced its lending rates, which were too high,” Robertson said.
Another analyst with a local financial institution said since the market was awash with cash, the reduction of overnight rates though in line with inflationary trends would not be able to mop up cash in the market.
Meanwhile, the recent reduction of lending rates by commercial banks from 208% to 195% per annum is said largely to be in line with the central bank position — that lending rates should not be above 250%.
This position is said to have brought the need by the RBZ to revise its overnight rates in line with the monetary statement targets.