RBZ moves to curb speculative borrowing

By ZBC Reporter

The Reserve Bank has moved in to ensure that people do not borrow for speculative purposes by adjusting the interest rate policy framework to help maintain the macroeconomic stability.

In its latest Monetary Policy Committee Meeting held on the 28th of October, the Reserve Bank of Zimbabwe adjusted the bank policy rate from 40 to 60 percent which means that borrowers will be charged an interest rate that is above the inflation rate. South Korean based Economic research consultant Collins Jonasi says this is the first time in years the central bank has come up with a positive real interest rate framework which is essential in curbing speculative borrowing which often creates money supply growth.

This is welcome because a negative real interest rate regime promotes people to borrow for no apparent reason and that causes increase money supply in the economy, he said.

Statistics show that the loan to deposit ratio in the banking sector had ballooned to around 80% an indication  that people were incentivised to borrow due to these low interest. South African based Zimbabwean economist Calving Mudzingiri praised the central bank for this bold move.

The central bank did the right thing because high credit growth stokes inflationary pressures and the recent spike in inflation may be attributed to these negative real interest rates, noted Mudzingiri.

The Central Bank MPC resolutions are intended to contain the inflationary pressures emanating from increasing money supply growth through high credit growth and this is expected to harness the obtaining macro-economic stability.

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