Zimbabwe’s banks are making a killing from charges levied from their customers with over 84% of their profits coming from charges, Deputy Minister of Finance Clemence Chiduwa told Parliament.
He said the government had engaged the banks and their association and they said the main reason was that most of their solutions were imported.
“We have implored on BAZ to say let us try to ensure that the solutions that we use in Zimbabwe are local solutions. At the moment we cannot direct them to reduce the bank charges but what we are saying is collectively as BAZ, they need to re-look at their charges so that they are in-line with the market and they need to make sure that they are competitive and seek for local solutions, especially for the software they are importing,” Chiduwa said.
Asked to review the high interest rates of 200%, Chiduwa said this was basic economics.
“This is basic economics because the interest rate is supposed to follow the inflation rate. At the end of the day, what investors want is to ensure that they will get a positive return,” he said.
“As the inflation rate moves, the interest will also move in tandem but for this peculiar case in Zimbabwe, what we wanted was to nip the speculative bubble that was there.
“People were borrowing money in order to participate in the parallel market and there was no production which was happening.
“In the case of production, what we have done as a government is, for those who are borrowing for speculation we will apply the 200% interest rate but for those who are into production we are using 100%. So, I think this is in order and is basic economics.”
Q & A:
HON. CHIDAKWA: Thank you Mr. Speaker Sir. I am directing my question to the Deputy Minister of Finance. It has become expensive to transfer and withdraw money from banks and other money transfer systems or agencies. What is Government policy position on tax exemption for the poor and vulnerable population such as pensioners and those living with disabilities? Thank you Mr. Speaker Sir.
THE HON. SPEAKER: What is the issue about the people you have mentioned?
HON. CHIDAKWA: It is on the exemption Mr. Speaker Sir. The charges are too high.
THE HON. SPEAKER: The tax exemption?
HON. CHIDAKWA: Yes Mr. Speaker Sir.
THE HON. SPEAKER: Thank you.
THE DEPUTY MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHIDUWA): Thank you Mr. Speaker Sir. I would like to thank the Hon. Member for the question which is specifically asking about the high bank charges. I think this is an issue that we have been talking about in this Parliament. The bank charges that are being levied by our financial institutions are very high. Even if we look at the performance of our banks, above 84% of their profits comes from bank charges and we have engaged the banks and BAZ, and the major reason that they have given us is that most of their solutions are imported.
We have implored on BAZ to say let us try to ensure that the solutions that we use in Zimbabwe are local solutions. At the moment we cannot direct them to reduce the bank charges but what we are saying is collectively as BAZ, they need to re-look at their charges so that they are in-line with the market and they need to make sure that they are competitive and seek for local solutions, especially for the software they are importing.
HON. BITI: I have a supplementary question for the esteemed Deputy Minister of Finance. Bank charges are too high and the fact that even on his admission, banks are making profits from bank charges, seventy nine percent of bank profit is coming from bank charges when the business of banks is selling money and therefore making money from interests. Surely, the Ministry of Finance must regulate or cap bank charges. Equally, the interest rate of 200% is too high. Most people in this august House are farmers and business people. You cannot borrow money at 200%. The interest rate of 200% is choking business.
THE HON. SPEAKER: Can you please ask your supplementary question?
HON. BITI: The interest rate of 200% is unprecedented in the history of economics. The Government must lower the rates of interest to allow business to have oxygen. High interest rates of 200% are driving this economy into a recession because business is of borrowing. I thank you Mr. Speaker.
THE HON. SPEAKER: Order, you did not ask your supplementary question.
HON. BITI: My supplementary question is, can the Government cap bank charges? Can the Government lower the punitive rate of interest of 200% which is leading businesses to collapse because the oxygen of business is working capital derived and obtained from commercial banks?
HON. CHIDUWA: I think what Hon. Biti mentioned to say the interest rates are very high and it has never been seen in our history. I think what we have done as a Government is, we just applied basic economics. This is basic economics because the interest rate is supposed to follow the inflation rate. At the end of the day, what investors want is to ensure that they will get a positive return. As the inflation rate moves, the interest will also move in tandem but for this peculiar case in Zimbabwe, what we wanted was to nip the speculative bubble that was there. People were borrowing money in order to participate in the parallel market and there was no production which was happening. In the case of production, what we have done as a Government is, for those who are borrowing for speculation we will apply the 200% interest rate but for those who are into production we are using 100%. So, I think this is in order and is basic economics.
HON. GONESE: The original question’s import was whether the Government had a policy relating to vulnerable groups and in particular those with disabilities; the elderly were mentioned. I would also add those people who have chronic illnesses and so on, pensioners. My supplementary question is whether Government has considered having a moratorium for those specific groups who are disadvantaged and vulnerable because his response was just general. The question was whether he can come up with a position of Government.
HON. CHIDUWA: On pensioners, I think they are exempt from IMTT and on the bank charges; the issue that is being asked is whether we should come up with a moratorium. I think this is something that we can consider but at the moment we do not have such a policy.
HON. TEKESHE: I just want to know from the Minister, we are talking of interest rates which are very high but banking is about interests. We are supposed to be getting interests when we bank our money but at the moment you bank your money and it is all eroded by bank charges. Why are we not getting any interests from the money we are investing in the banks?
THE HON. SPEAKER: Hon. Member, I thought Hon. Gonese had brought us back to the relevance. It is a question of the pensioners – [HON. MEMBERS: Inaudible interjections.] – Can I hear Hon. Chinyanganya, what were you saying? I had closed supplementary questions.
HON. CHINYANGANYA: You have ruled him out, so it follows that there is supposed to be another one.
THE HON. SPEAKER: Yes, you have not spoken. Hon. Mliswa is speaking a lot.
HON. CHINYANGANYA: Thank you Mr. Speaker for indulging me. My supplementary question is, the Hon. Minister was only responding on the issue of bank charges but there is the mandatory Government aspect of taxes; the 4% and 2% tax charges on transfers. He never talked about those. What is…
THE HON. SPEAKER: Hon. Member, we were talking about the pensioners and other vulnerable groups. Do not go into another field please. Stick to the original question.
HON. CHINYANGANYA: Hon. Speaker, can you give me the chance to ask my question. I am saying they are also affected by those Government mandatory taxes on money transfers. So, what is Government doing to assist those vulnerable groups not to be charged IMTT?
HON. CHIDUWA: On the issue of IMTT, I think I had responded to that.
THE HON. SPEAKER: The question is; can the pensioners be exempted from that tax?
HON. CHIDUWA: Mr. Speaker Sir, I think these are issues that have been asked, whether there can be a moratorium on that and I said those are issues we can look at and deliberate further on.
HON. T. MLISWA: On a point of clarity Mr. Speaker Sir. The Hon. Deputy Minister said inflation is high and because of that, the banks have increased the interest rates but the salaries that people are getting are not high. So, how then can interest be high when the people’s salaries have not been increased according to inflation? If inflation is high, the people’s salaries must be increased so that the bank interest is high. I want clarity on that from an economic point of view. How does it work?
THE HON. SPEAKER: That point of clarification does not arise because it does not relate to the pensioners.
Hon. Members, I want to remind you that we have not forgotten the issue of attendance by the Hon. Ministers. At the close of the session, we will do a wrap up of those Members who have not come and then on Thursday, a motion shall be moved accordingly in terms of Sections 27 and 67 of the Standing Orders as read together with Section 107 (2) of the Constitution. I thank you.
Source: ZimInsider
