THE DEPUTY MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHIDUWA): Thank you Mr. Speaker Sir. I would like to thank the Hon. Member for the question which is specifically asking about the high bank charges. I think this is an issue that we have been talking about in this Parliament. The bank charges that are being levied by our financial institutions are very high. Even if we look at the performance of our banks, above 84% of their profits comes from bank charges and we have engaged the banks and BAZ, and the major reason that they have given us is that most of their solutions are imported.
We have implored on BAZ to say let us try to ensure that the solutions that we use in Zimbabwe are local solutions. At the moment we cannot direct them to reduce the bank charges but what we are saying is collectively as BAZ, they need to re-look at their charges so that they are in-line with the market and they need to make sure that they are competitive and seek for local solutions, especially for the software they are importing.
HON. BITI: I have a supplementary question for the esteemed Deputy Minister of Finance. Bank charges are too high and the fact that even on his admission, banks are making profits from bank charges, seventy nine percent of bank profit is coming from bank charges when the business of banks is selling money and therefore making money from interests. Surely, the Ministry of Finance must regulate or cap bank charges. Equally, the interest rate of 200% is too high. Most people in this august House are farmers and business people. You cannot borrow money at 200%. The interest rate of 200% is choking business.
THE HON. SPEAKER: Can you please ask your supplementary question?
HON. BITI: The interest rate of 200% is unprecedented in the history of economics. The Government must lower the rates of interest to allow business to have oxygen. High interest rates of 200% are driving this economy into a recession because business is of borrowing. I thank you Mr. Speaker.
THE HON. SPEAKER: Order, you did not ask your supplementary question.
HON. BITI: My supplementary question is, can the Government cap bank charges? Can the Government lower the punitive rate of interest of 200% which is leading businesses to collapse because the oxygen of business is working capital derived and obtained from commercial banks?
HON. CHIDUWA: I think what Hon. Biti mentioned to say the interest rates are very high and it has never been seen in our history. I think what we have done as a Government is, we just applied basic economics. This is basic economics because the interest rate is supposed to follow the inflation rate. At the end of the day, what investors want is to ensure that they will get a positive return. As the inflation rate moves, the interest will also move in tandem but for this peculiar case in Zimbabwe, what we wanted was to nip the speculative bubble that was there. People were borrowing money in order to participate in the parallel market and there was no production which was happening. In the case of production, what we have done as a Government is, for those who are borrowing for speculation we will apply the 200% interest rate but for those who are into production we are using 100%. So, I think this is in order and is basic economics.
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