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Zimbabwe: Interbank Rates Firm
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Financial Gazette (Harare)
16 May 2008
Posted to the web 16 May 2008
Harare
INTERBANK rates swelled higher as banks scrambled for cash to avoid punitive accommodation rates from the central bank, which were hiked two weeks ago to limit borrowing.
The rates surged to around 4 000 percent on Monday as banks rushed for cash after making statutory reserve payments to the Reserve Bank of Zimbabwe (RBZ).
The inter-bank rates, which had previously hovered around 50 percent, had shot up to over 2 000 percent last week as banks battled to cover deficits in a dry market.
The inter-bank rates were, however, expected to soften on improving liquidity levels, and as banks started tightening up their liquidity management positions to limit their exposure on the volatile market.
RBZ governor Gideon Gono hiked accommodation rates in his monetary policy statement issued on April 30, saying this was consistent with the challenge to deal with rising inflation, which he said remained the country's enemy number one.
The unsecured accommodation rate was moved up to 5 000 percent, from 4 500 percent, while the secured accommodation rate moved to 4 500 percent, from 4 000 percent.
"It is imperative to note that the Reserve Bank continues to have no appetite for lending money to the banking system, and banking institutions are called upon to mobilise deposits through their normal banking business processes and programmes," said Gono.
Analysts warned banks to be prudent in their liquidity management, saying the punitive rates on the market were likely to affect those short of cash, consequently eroding their margins.
Gono's decision to limit borrowing is meant to curtail money supply growth, the major driver of inflation in the country.
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Annual broad money supply growth has been on an upward trend, increasing from 1 638.4 percent in January 2007 to 51 768.8 percent in November 2007, according to the central bank.
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