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The Reserve Bank of Zimbabwe has secured $210 million from development finance institutions to fund capital projects in key productive sectors of the economy.
The initiative is part of the central bank’s broad efforts to improve productivity, boost exports and improve liquidity. In his Mid-Term Monetary Policy Statement released on Wednesday, the RBZ governor, John Mangudya, said beneficiaries of the funds obtained from PTA Bank, the Afreximbank and the Development Bank of Belarus are firms with capacity to enhance productivity and repay the loans.
Mangudya said in view of the integral role played by export earnings in the generation of foreign exchange resources, there was a need to put in place deliberate measures to promote production across the whole spectrum of the economy.
The governor said the central bank was gradually expanding its role under the development finance programme to go beyond stabilisation and ensure debt sustainability.
“This is critical to generate the much needed export earnings to improve liquidity conditions while simultaneously substituting or displacing imports,” said Mangudya.
The RBZ, Mangudya said, had also reached an agreement with banks to cap interest rates at 18 percent as part of measures to reduce the prohibitive cost of finance.
This, he said, brings relief to the borrowing public and corporates who have had to endure high interest rates. Banks are required to effect the new lending rates for both existing and new borrowers, with effect from October, 2015. Mangudya said there was a need to reduce interest rates to ensure lending rates support economic recovery.
Local banks have been charging interest rates as high as 35 percent excluding default rates of equal or higher thresholds.
The central bank governor said it was important for banks to reduce their cost structure to enable them to contribute to the reduction of the cost of doing business in the country.
Defaulters under the new arrangement will be charged penalty rates of between three and eight percent over and above the interest rate they would have been charged for loans obtained.
Mangudya said banks thrive when business is both willing and able to timely repay loans, which has not been the case since dollarisation in 2009. The review of bank charges and interest rates is envisaged to stimulate aggregate demand, promote resuscitation of industry and cut cost of doing business.
The RBZ and banks have taken a bold step to stimulate economic growth by reviewing downwards the lending rates and business must reciprocate by meeting its part of the bargain. Banks, as rightly observed by Mangudya, can only strive if business is both willing and able to timely repay loans advanced.
It is therefore imperative for business to ensure that loans are used for their intended purposes to enable the same business to timely repay the loans.
There have been numerous cases in the past when money meant to boost production has been diverted to buy luxuries such as vehicles resulting in an upsurge in non-performing loans.
The central bank should therefore put in place a monitoring mechanism to ensure that the money advanced to companies is used to boost production so that the companies are able to timely repay the loans.
It is pleasing to note that there has been a deliberate move by local producers to reduce the prices of goods and services. The reduction in prices will enhance competitiveness of local products which is critical if the country is to increase its export earnings.
We want at this juncture to implore business to take advantage of measures put in place by RBZ and banks to reduce the cost of doing business to boost production and ultimately eradicate imports.
Online Reporter