THE Reserve Bank of Zimbabwe monetary policy committee has proposed a new interest rate structure amid public outcry over disparities between lending and deposit rates.
By Acting Business Editor
The MPC, according to a statement issued by the apex bank yesterday, last Thursday met in the capital to deliberate on the structure of interest rates and proposed a yield curve for Zimbabwe.
The development comes barely a month after the central bank lifted a memorandum of understanding that put a cap on bank charges and interest rates.
The MPC, the bank said, deliberated on the need for an appropriate interest rate structure that can be used as a benchmark in the country’s financial markets. The proposed interest rate structure, according to the central bank, is derived from both theoretical and empirical literature on yield curve determination.
The central bank proposed indicative yields of 6,6% for 91 day instruments,7,2% for 180 day instruments and 8% for 365 days (1 year) instruments are envisaged to sanitise the country’s interest rate structure which has curtailed deposit and credit growth.
This yield curve, according to the central bank, acts as a guide to the structure of interest rates, especially the Treasury Bill rates.
Lending rates quoted by banks range between 6% and 35% per annum, with most banks quoting average lending rates of around 20%. However, deposit rates range from 0,15% for savings accounts to 20% for time deposits.
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“The current interest rate structure in Zimbabwe is distorted as evidenced by the wide disparity between deposit and lending rates. These distortions have been sending mixed signals to the market as reflected by inconsistencies in the pricing of loans and savings deposits,” the Reserve Bank said.
The apex bank said the recent move by Treasury to capacitate the central bank to resume its lender of last resort function was expected to lower market liquidity risks by unlocking funds in the inter-bank market.
“For the inter-bank market to operate smoothly there is need for the availability of acceptable securities to be pledged by the deficit banking institutions. This calls for the issuance of instruments, which qualify as collateral. A yield curve is, therefore, vital in providing guidance on the yield to maturity of such instruments,” the Reserve Bank said.
