KFHL said deposits in the banking sector, though on the increase, would be largely short term in nature given that the Reserve Bank of Zimbabwe (RBZ) is yet to assume its lender of last resort function.
“It therefore follows that interest rates are expected to remain high (ranging from 10%-25% per annum) depending on the banking institution and its liquidity standing,” it said.
In the 2012 budget Finance Minister Tendai Biti allocated US$100 million to RBZ to enable it to effective perform its lender of last resort role. However, there are fears that the money would lie idle as there are no flexible instruments to be lodged as collateral if banks want to borrow overnight from the central bank.
Under normal circumstances, banks use treasury bills as collateral if they are to borrow from RBZ.
KFHL said that the onset of the tobacco selling season and the sale of the diamonds should see a moderate softening of interest levels “especially in the second quarter due to the resultant improvement in the liquidity situation”.
Latest statistics from the central bank show that bank deposits increased to US$3, 21 billion in October from US$3, 03 billion in September.
The increase was attributed to an increase by US$211, 64 million (24, 5%) in saving and short-term deposits and US$19, 12 million (1, 05%) in demand deposits.
However, the increases were partially off-set by a decline in long-term deposits by US$48, 14 million (13, 8%).
Companies require long term loans to retool operations but banks say they are only able to provide short term loans as deposits are largely of a short term nature.
Analysts say the unavailability of long term deposits can be attributed to low salaries prevailing on the market which are chewed by consumption.