HARARE: The Reserve Bank of Zimbabwe (RBZ) this week moved to protect banks and put on hold plans by the Zimbabwe Revenue Authority (Zimra) to slap a 30% duty on imported notes in a move that would have pushed the country’s cost of funding to unsustainably higher levels, sources close to monetary authorities said.
The development would have seen banks passing on the 30% duty charge to its customers, making Zimbabwe’s lending rates unsustainably high. The United States dollar is already 45% overvalued in Zimbabwe. Had Zimra had its way on the notes, this would have dampened Zimbabwe’s prospects of economic recovery. High cost of money generally mean businesses cannot borrow to finance growth.
Insiders told businessdigest that Zimra had indicated to bankers that it would charge duty on imported notes as the country continues to use multiple currencies following the redundancy and subsequent demonitisation of the local unit.
Zimbabwe dumped its local currency in 2009 after an unprecedented economic meltdown characterised by hyperinflation and acute foreign currency shortages. Although the introudtcion of the multi-currency system has brought macro-economic stability, the core monetary policy functions of the RBZ have been made redundant.
According to sources, poor revenue collections and company closures, could have forced Zimra to approach banks with a view to charge duty on notes. Company closures and scaling down of operations, saw the country’s tax collector raising US$878 million in revenue for the third quarter ending September against a target of US$964 million.
“We have received full support of the central bank on this issue as it was going to push the cost of funding higher,” a local banker who requested anonymity said. “For a bank importing US$1 million for instance, the duty would have been US$300 000 and this cost — which excludes a further 2% insurance, storage and cash in transit — would have been passed to the consumer. This was a timely intervention by the central bank.”
RBZ governor John Mangudya and Bankers Association of Zimbabwe (Baz) president Sam Malaba could not be reached for comment, but insiders confirmed that the planned move by Treasury to charge duty on notes would have had far-reaching implications on the country’s pricing structure, production, aggregate demand and competitiveness.
Experts say the real weighted lending rates for both corporates and individuals have generally been higher in 2015 than 2014. In 2015, the lending rates for corporates have been higher, which is likely to be associated with very strong growth in real credit demand.
On the other hand, lending rates for individuals slightly declined in June and July 2015. In the prior months of April and May, lending rates were slightly higher.
Official figures show that as at September 30 2015, total banking sector deposits and loans amounted to US$5,5 billion and US$4 billion, respectively, translating to a loan-to-deposit ratio of 72,7%.
The sector remained profitable during the period ended September 30 2015, with an aggregate net profit of US$86,09 million, compared to US$24,35 million recorded in the same period last year. The central bank says the banking sector is adequately capitalised with a capital base of US$916,81 million as at September 30 2015 and an average capital adequacy ratio of 21,5% against the regulatory threshold of 12%.
