Analysts have called on the adjustment of lending rates in the banking sector as a way of aligning the interest rate policy with the exchange rate policy framework.
The prevailing situation in the banking industry does not encourage investment in long term assets because interest rates are lower than the inflation rates which will generate negative real returns.
On the other hand, the availability of cheap money incentivises consumptive borrowing whilst discouraging investment.
Mr Batanai Matsika, a stock market analyst says the current situation where the interest rate policy is detached from the exchange rate policy framework needs to be dealt with because it gives rise to speculative tendencies in the banking sector.
“It is important for the central bank to realign the two policy frameworks, that is the interest rate policy and exchange rate policy.
“Inflation rose to around 56 percent in October last year and that obviously put real returns in the negative territory. So that realignment is quite key at the moment,” said Matsika.
Currently, the interest rates are the average of bank’s lending rates which is around 7.5 percent.
Month on month inflation has drastically gone down to less than 10 percent for February with the year on year inflation expected to recede towards October.
Meanwhile, milk producer Dairibord released its impressive set of financial results for the year ending 2018 which showed a huge leap in profit after tax to owing to increased milk volumes and cost containment strategies.
This is despite an otherwise difficult operating environment in 2018.