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Sunday, May 26, 2024

Economists speak on need to continuously review Statutory Reserves

Story by Davison Vandira, Business Reporter

FISCAL authorities have been reminded of the need to consolidate the current economic stability by strengthening Statutory Reserves to ensure that bank balances are equal to the real cash in the economy.

The 2023 Monetary Policy Statement shows that the deposits to loan ratio in United States dollar terms is at 56 percent, while a money multiplier interest of up to 15 percent is being applied by the financial sector.

While loans are a critical driver of productivity in the economy, economists, informed by past experiences, have called upon monetary authorities to strictly monitor and continuously review real statutory reserves and interest rates for the sake of maintaining economic stability.

Economist Dr Nyasha Kaseke notes, ‘‘There is a need to keep an eagle’s eye on the developments of Statutory Reserves and lending rates especially now that the economy is being dominated by United States dollar transactions, with the overall objective being to slow down the rate of credit creation that will be synonymous with other monetary fundamentals.’’

Investment analyst Mr Batanai Matsika also says, ‘‘The lending rates are a bit on the high side at 15 percent which means generally the money multiplier effect is on the high side and as the economy is tilted towards dollarisation there is need to reduce these lending rates to commensurate levels.’’

The Reserve Bank of Zimbabwe (RBZ) has since announced that it will balance growth and stability through implementing a robust mean monetary policy stance in the foreseeable future.

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