Pension funds and savings institutions have lost 75 percent of the value of money advanced to the government over the past two years because of negative real interest rates.
Though interest rates have firmed recently as the government tries deter borrowing for consumptive purposes, the margin between these rates and inflation is too high and does not encourage savings.
And because of the anticipated high budget deficit and the need to finance the current agrarian reform, the government is not likely to increase interest rates to match inflation.
The government had already borrowed $546 billion by mid-year up from $346 billion at the end of December. Borrowing was likely to go up because of the supplementary budget and the need to finance inputs for the coming season as well as grain imports.
There are no prospects for growth. Gross Domestic Product which fell by 5 percent in 2000, 7.5 percent in 2001 and 11.9 percent last year, is expected to decline by 11.5 percent this year.
The capital account deficit which stood at US$200 million last year is expected to rise to US$300 million this year. External payment arrears are expected to rise to US$1.6 billion with government arrears accounting for 67 percent, parastatals 31 percent and the private sector only 2 percent.
This gloomy picture is painted by NMBZ Holdings. The banking group saw its net interest income improve from $2.3 billion to $10.9 billion and other income rise from $1.4 billion to $8.8 billion.
Net income increased from $1.3 billion to $9.2 billion slightly less than the $9.6 billion realised for the full year last year. The group says consistent monetary and fiscal policies should be implemented urgently to arrest galloping inflation to resuscitate the economy and encourage growth.
It says the government must also implement a flexible and responsive exchange rate that takes market conditions into account.
Economic measures agreed by the tripartite negotiating forum should be implemented immediately while there is need to restore relations with the international community.