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RBZ discourages borrowing

THE Reserve Bank of Zimbabwe says it will be strict on its lending policies to commercial banks that want to borrow from the central bank to cover their short positions.

In a circular to banks last week, the central bank said it

will also be closely monitoring capitalisation levels of financial institutions.

The central bank said banking institutions should actively engage each other on the interbank market to avoid resorting to the punitive overnight accommodation rates which are currently at 800% and 850% for secured and unsecured lending.

“Borrowing from the Reserve Bank is highly discouraged and should only be considered on a lender of last resort basis,” the central bank said in the circular dated November 2.

“Accommodation rates should therefore be seen as policy rates that show the bank’s unwillingness to be injecting inflationary liquidity into the market,” added the bank.

In October the Central Bank announced that it was using its interest rate instrument to repel speculative tendencies and reduce inflationary pressures.

This is despite the continued support to productive sectors through concessionary loans at 25%.

“This borrowing discipline will also be expected from Fiscal Authorities who should live within their set budgets.” — Staff Writer.

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