THE recently announced interest rates regime and a halt in government’s ballooning expenditure could soon force banks into serious cash shortages, a leading bank has warned.
Reserve Bank governor, Gideon Gono last week revised secured accommodation rates to 8 500% from 6 500% in an effort to mop up excess liquidity on the money market. Unsecured rates were adjusted from 7 000% to 9 500%.
In a market report Kingdom Financial Holdings Limited described the new interests rates as “out of synch” with inflationary trends.
“The rates are too ghastly to contemplate if one takes into account their effect on bank survival in the event of a money market liquidity crunch which will force banks to go to the central bank for accommodation,” the bank said.
“The high policy rates have created a situation whereby banks are now dangerously vulnerable to the continued existence of high expenditures by the authorities because any slow down in their fiscal and quasi-fiscal activities will cause weeping and gnashing of teeth by banks and their clients.”
When contacted for comment the Bankers Association of Zimbabwe (BAZ), however said the new interest rates would not affect the financial position of banks.
“There is no bank that will be affected by these new interest rates,” said BAZ president John Mangudya.
“These interest rates only discourage people from speculative and consumption borrowing.”
He said the long queues at banks resulted from “frequent transactions for daily purposes” adding that the association had brought this issue to the attention of the Reserve Bank.
This week businessdigest observed long queues of customers seeking cash withdrawals from various banks around the central business district. Customers said these queues were a result of an inadequate maximum daily cash withdrawal.
The central bank recently reviewed the daily limits to $100 billion from $25 billion in response to runaway year-on-year inflation now estimated to be over 10 000 000%. Since the announcements of the interest rates, foreign exchange interbank rates have momentarily stabilised closing just below the $20 billion mark yesterday.
“We are fast heading towards the pre-Christmas problems we faced last year,” complained one customer at Barclays bank branch along First Street.
“This money (maximum withdrawal) can only pay my bus fare for two days.”
Other financial analysts who spoke to this paper on condition of anonymity said the recurrent cash shortages were attributed to a decision by a German money printing company to cease business with President Robert Mugabe’s administration amid calls by European Union to impose stiffer economic sanctions on Zimbabwe.
With one of the largest cabinet in the world, the government meets daily debts that include tobacco and gold purchases, civil service salaries and concessionary funds. Five years ago, the country’s financial sector was hit by a liquidity crunch that resulted in the closure of more than 10-asset management companies and about six building and commercial banks.
By Bernard Mpofu