Biti threatens Zimbabwe banks over interest rates

Published: 10 June 2013

Government will codify into law the Memorandum of Understanding between the Reserve Bank of Zimbabwe and banks if the agreement is not fully implemented, Finance Minister Tendai Biti has said.

The framework agreement on interest rates, bank charges and interest on prescribed amounts held in call accounts for a given period would be assessed after six months from last month.

"We are monitoring implementation of the agreement closely. If there is no sufficient implementation of the MoU we will codify it into law. This is what they (RBZ and banks) agreed on," said the minister.

Minister Biti made the remarks in an interview following his official opening of the two-day Committee of Sadc Stock Exchanges meeting being hosted by the Zimbabwe Stock Exchange yesterday.

The RBZ agreed with banks to set lending rates at not more than 12,5 percent per annum. Fiscal and monetary policy authorities intervened following concerns punitive rates were hurting industry and individuals alike. Before the MoU, banks had been charging between 7 percent and 30 percent on loans per annum.

In terms of the MoU, bank charges would now be set at a maximum 0,5 percent of cash withdrawn.

Banking institutions used to levy the banking public a minimum of US$2,50 per cash withdrawal transaction.

Further, the agreement stipulates that all amounts above US$1 000 held in a call account for more than a month should attract interest of at least 4 percent per annum. Prior to this most banks did not offer such interest.

Minister Biti was speaking at the CoSSE meeting organised by regional stock exchanges to share experiences and insights on various aspects of the bourses’ operations with a view to better the way they work.

"The stock market has become a significant component of the financial sector and resource mobilisation for the corporate world. There is a great demand for long-term growth capital in Africa and as Sadc stock exchanges, I challenge you to seize this opportunity to harness savings from both the region and foreign sources," he said.

He called on CoSSE members to address issues of technology, access to information, availability of data and harmonise rules and urged the members to continue working against perceived country risks and enhance access to information thereby reducing transaction costs and world-class regulatory standards.

The Finance Minister said attracting foreign capital was not the work of CoSSE members alone, as Government policymakers were also expected to create an enabling environment.

This was critical for countries like Zimbabwe which requires about US$14 billion for key infrastructure such as Hwange Thermal Power Station (US$1 billion), Batoka hydropower project and roads (US$4 billion). He said manufacturing and mining sectors required about US$4 billion and US$7 billion, respectively.

Minister Biti said that more foreign capital was required for dams and irrigation infrastructure.
- TH