• Government spiked IR by 120 bps stifling productive borrowing
  • Group’s PAT soared by 379%
  • However, net premium written declined by 3%

Harare- Diversified investing outfit, Fidelity Life Assurance Zimbabwe says government should review the interest rates downwards to make borrowing more affordable and drive the economic growth agenda. 

In a statement accompanying the half-year financials for the six-months ended 30 June 2022, the Group’s chairperson, Livingston Gwata said the record interest rates at 200% have the potential to stifle growth and choke genuine business activities. 

“The hike in interest rates to 200% per annum has certainly curbed borrowing however it has the real potential of stifling growth and choking genuine business activity.”

“Should the relative currency stability of the past month persist into the last quarter of 2022, we anticipate that Central Bank will review the policy rate downwards to make borrowings more affordable and drive the economic growth agenda,” Gwata said in a statement accompanying the financial results. 

Government hiked the bank policy rates by 120 basis points in May 2022 to 200%, which is a global record high as it battled to control speculative borrowing from the private sector and rescue the Zimbabwe dollar from the deathbed. 

The speculative borrowing has caused excess liquidity of the Zimbabwe dollar in the market, chasing the few US dollars causing exchange rate disparities which heavily fuelled inflationary pressures. Due to excess of the local currency in the market, the Zimbabwe dollar lost by over 200% against the greenback reaching an all-time low of ZWL1000:US$1 by July this year. 

Meanwhile, net premium written declined by 3% to ZWL1.241 billion from ZWL1.285 billion during the same period in 2021. The decline was necessitated by a decrease in gross premiums by 5% to ZWL1.325 from ZWL1.401 during the same period last year. 

However, fee and commission income grew to ZWL123 million from ZWL99 million while investment income rocketed to ZWL177 million from ZWL157 million in 2021. 

Ultimately total income for the Group soared by 379% to ZWL13 billion from ZWL2 billion in 2021 during the same period with profit after tax hitting ZWL2 billion.

This was despite monetary loss spiking by 35% to ZWL384 million and income tax expenses growing to ZWL44 million from ZWL38 million in the comparative period. 

“Overall, we expect the macroeconomic environment to remain challenging with inflation remaining undesirably high through to the year-end,” Gwata said. 

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