HARARE, — Zimbabwean President Robert Mugabe on Tuesday slammed local banks for charging high interest rates, which, he said, stifled economic recovery.
The president said what the banks were doing was akin to extortion and imposition of sanctions against depositors.
The banks have been charging interest rates as high as 35 percent per annum while paying comparatively very little interest on deposits, citing high cost of money from external markets for the exorbitant rates.
The banks recently reduced the interest rates by more than 10 percent after reaching an agreement with the central bank.
“The banks are still in the habit of charging interest rates well beyond the principle sum borrowed,” Mugabe said.
“We have said this must stop; it is extortion, extortion by our banks. If they can not do banking in the proper way, please they should stop it,” he said.
The president, who was speaking at the burial of businessman and ruling Zanu-PF central committee member Aguy Georgias at the national shrine, said banks were worsening the already difficult economic situation by charging exorbitant rates.
“This economy faces many challenges brought mainly by sanctions but there is a way in which the banking sector has not made matters any easier. Banks seem to pass their own sanctions package against us including those who deposit with them,” he said.
The president said the high interest rates undermined economic recovery efforts through “undermining the propensity to save by punishing borrowers”.
He hoped that banking sector reforms being implemented by the central bank would help to correct the situation and inject more liquidity into the capital-starved market.
The acceptance of the Chinese yuan into the world’s basket of reserve currencies should offer new possibilities for the country, Mugabe said.
His comments follow Finance Minister Patrick Chinamasa’s remarks this week that Zimbabwe was looking at expanding use of the Chinese currency in the economy after the central bank in 2014 added the yuan to a basket of foreign currencies being used in the country that include the U.S. dollar, British sterling and South African Rand.
Zimbabwe adopted the use of multiple currencies in 2009 after its currency had been rendered worthless by hyperinflation.