Economic Planning minister Tapiwa Mashakada said the ministry was targeting single digit annual inflation as the plan is premised on the need to enhance economic transformation in Zimbabwe.
The plan aims to “lock inflation in the band of 4% to 6% while targeting an average economic growth rate of 7%”.
“We are going to be very aggressive to make sure that banks reduce interest rates so as to promote savings and foster investment in the economy,” said Mashakada adding that the ministry intended to avoid a banking crisis scenario similar to that which occurred in 2004.
Ever since the inception of the multi-currency system in 2009, Zimbabwe’s banking sector has been criticised for failing to stimulate investment and domestic savings owing to punitive lending rates over a short window period.
Lending rates vary between 10% and 30%, while Investment group Imara says these rates remain high against regional and international benchmarks.On the other hand, interest on savings has been low and government believes it does not promote a savings culture.
According to the Ministry of Finance, the domestic savings rate remains very low at 2% of Gross Domestic Product (GDP), although this is expected to improve to between 20% and 30% by 2015.
Mashakada said the MTP, which runs from 2011 to 2015, is considered a vital tool for government to clearly spell out Zimbabwe’s national priorities for both domestic and foreign investors and co-operating partners.
Economic Planning permanent secretary Desire Sibanda said a number of measures would be pursued to ensure that the banking sector reduces interest rates.
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“The key issue is that of demand and supply.
“The MTP prioritises increasing productivity and accessing lines of credit to stimulate liquidity in the economy resulting in a stable monetary system,” Sibanda said.
He said that investment promotion efforts were being made in pursuit of bilateral investment agreements with Botswana and South Africa while similar arrangements with India and South Korea were being made.
Sibanda said that internal savings in Zimbabwe in 2008 stood at less than 5% of investment over GDP but the blueprint plans to raise the figure from less than 10% to at least 25% of GDP over the next five years.
“A savings culture will be fostered through the widening of the tax base, incorporation of the informal sector into the formal sector, encouraging micro-finance initiatives, tapping into the rural economy, and more attention to Diaspora remittances,” he said.
