adminpercent and now range between 15 and 18 percent. Money market rates declined from between 14 to 16 percent at the beginning of the year to between 10 to 12 percent.
In its analysis of the Zimbabwe Stock Exchange, securities firm, Imara said the measures were short-term. Thus, the liquidity position still remained unresolved, meaning the lending rates were unlikely to decline significantly in the near term.
“Proceeds from the tobacco-selling season and repatriated nostro accounts balances have somewhat led to softening in money market rates,” said Imara.
About US$200 million is expected from nostro accounts, while tobacco sales have generated over US$350 million during the period under review.
African multilateral and financial institutions have also been increasing funding into Zimbabwe and this has improved liquidity situations in the country.
PTA Bank has had a keen interest in resuscitating the country’s economy and has been working with local banks and companies in the provision of affordable funding to alleviate liquidity challenges.
In the outlook interest rates are likely to remain high, leading to high slippage and weak fundamentals of some local companies.
Analysts say this raises concern of deteriorating credit quality. According to the Reserve Bank of Zimbabwe, lending rates have been ranging around 30 percent per annum against a low of between 2,5 and 5 percent paid on savings deposits.
“We do not expect any changes in the short term due to liquidity strain,” said Imara.
Zimbabwe’s loan-to-deposit ratio remains high at around 79 percent.
The loan-to-deposit ratio declined from 87,l4 percent in January 2012 to 82,2 percent in February 2012.
The African Development bank last month said this stance was in view of the prevailing non-performing loans, over-lending, over-borrowing and high anticipated default risk.
“The prevailing conditions point to a need for caution on the part of both borrowers and lenders. In an environment with high-lending rates, overborrowing is risky, as it easily results in high loan default rates,” the bank said.
Meanwhile, a lot of activity is expected in the capital market as fiscal authorities are working on a number of modalities aimed at developing money market instruments
to finance various sectors of the economy.
To make these instruments attractive to investors, Government is granting special features, such as prescribed asset status, tax exemptions and liquid asset status.
Online Reporter