• The Group says interest rates will continue to bite operations
• Zimbabwe boasts global record high interest rates of 140%
• However, the Group says it will capitalise on strategies to generate more foreign currency

Harare- ZB Financial Holdings, a Zimbabwe Stock Exchange (ZSE)- listed entity says it expects the operating environment to remain volatile in the outlook due to high interest rates, exchange rates volatility and distortions in price dynamics.

In a trading update for the first quarter ended 31 March 2023, the Group said to protect its capital position from these adverse economic projections, it will continue to pursue strategic business partnerships, implement foreign currency revenue generation strategies and continue exploiting investment opportunities.

“In order to increase its sustainable revenue, the Group will make use of the world class Service Centres and the digital assets and the robust electronic channels to market its products,” the Group said in a trading update.

The Central Bank spiked interest rates to a global record high of 200% in 2022 before slashing them by 50 percentage points to 140% in February and then reduced them further by another 10 percentage points to 140% in a bid to tighten money supply.

However, in terms of borrowing, 140% still remains too high at both corporate and individual level, thus, limiting interest income for banks and consumer purchasing behaviour at large.

On the other hand, the rapid depreciation of the Zimbabwe dollar due to confidence deficit and consistency in policy slippages by the Treasury and Central Bank is causing volatility in the exchange rates.

Due to currency depreciation, the Zimbabwe dollar has depreciated by over 37% year-to-date using the formal market rate and by over 100% using the parallel market rate.

Premiums have widened by 56% making prices of goods too expensive in Zimbabwe dollars and affordable in US dollars which is however, scarce as most of the citizens earn salaries in local currency. This has promoted the flourishing of parallel market where the greenback is found at inflated prices.

To restore confidence deficit, the Central Bank introduced gold coins on the 25^th of July 2022. However, though liquidity was mopped up, this did not give respite to the ailing currency for a long time as Central Bank resorted to printing more money in December and January 2022 to cushion the public from inflationary pressures. This caused the black-market rate to breach the 1000 mark per dollar in January.

As it further battles to resuscitate the dire currency, RBZ further introduced gold-backed tokens and some economic measures in May 2023.

However, the new measures will unlikely meet the desired target as they are more of new wine in old bottles.

By implementing various economic measures to resuscitate the ailing currency, the government is curing the symptoms not the disease.

To restore confidence deficit there is a need not to pass many reforms but to entail monetary sanity, policy consistency and transparency.  

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