eBusiness Weekly
Tapiwanashe Mangwiro
Bankers, economists and farmers have expressed fears that the country might miss out on agriculture growth targets if interest rates remain punitive as they are currently pegged at 200 percent per year.
This comes after the Bankers Association of Zimbabwe (BAZ) chief executive, Fanwell Mutogo, told Business Weekly that the late financing of the agriculture sector could throw the season preparations into disarray, resulting in subdued output.
“Liquidity situation remains challenging but we are more worried for the farmers as this is the financing period for them and there is a need to quickly come up with a solution as agriculture remains the mainstay of the economy,” Mutogo said.
The banker said financial institutions are yet to do budgets for the summer cropping season as the liquidity crunch is restricting them to finance the sector.
“Direction is not yet clear on how much money will banks splurge for the new season given the current liquidity challenges,” Mutogo said.
Agricultural economist, Kumbirai Katsande said; “The 2022/2023 summer cropping season has already kicked off with irrigated crops already planted and with this liquidity squeeze in the market, the desired agriculture growth will be difficult to achieve.
As an agro-based economy, agriculture performance is key to economic growth hence if the sector doesn’t perform well, this will affect next year’s economic projections.”
On the other hand, the Reserve Bank of Zimbabwe (RBZ) has remained adamant that it will not budge on its policy stance in relation to the interest rate regime currently in place.
Dr John Mangudya, RBZ governor, told Business Weekly; “The interest rates are not going to change this year and agents of the economy should know that every policy has its consequences therefore they should also adjust.”
According to Mangudya, the farmers are getting loans at the medium term rate of 100 percent per annum, which is very much lower than the lending rate.
“The country is in a good space economically and people want us to reverse what has brought us here and go back to a place where they will complain about too much liquidity lying around,” Mangudya said.
Banks are, however, saying liquidity is tight and it is now about how much will be available to lend to the agriculture sector and that farmers have been shunning away from the bank as they feel the cost of money is too high for
them.
“We are lending, but the farmers are not coming in to get the money because they feel it is expensive, but for some who earn foreign currency for their produce, we have been lending US dollars at interest rates upwards of 10 percent,” Mutogo added.
