The Reserve Bank ofÂ Zimbabwe ( RBZ) has abolished with immediate effect statutory reserve requirements for banks, in a move expected to release more funds for lending by the financial sector and lowering interest rates.
Reserve Bank of Zimbabwe Governor, Dr. Gideon Gono said in a Mid-Year Monetary Policy Statement thatÂ although the financial sector remained safe and sound, the central bank has intervened by abolishing the statutory requirement reserve to ensure that interest rates are reduced to boost production across key sectors of the economy.
The move comes amid concerns from industry and individuals that the prevailing high interest rates ofÂ at least 24,7% are hindering efforts to turn around the economy.
Monetary authorities have also introduced new instruments aimed at boosting savings such as realigning interests rates with the prevailing inflation rate which currently stands at 6.1% as well as ensuring that borrowing institutions or individuals are charged fair interest rates that reflect costs in line with economic conditions.
Information from the central bank also revealed that as of 30 June this year, 17 out of 24 banking institutions had complied with minimum capital thresholds while 7 of the unqualifying banks have been directed to raise fresh capital from existing shareholders by 31 December this year.
Dr. Gono revealed that prospects of economic recovery are bright as stakeholders work on measures to consolidate macro- economic gains achieved so far.
Highlights of the Mid-Year Monetary Policy Review Statement include, the retention of 100% export proceeds by exporters, the capacitation of the central bank, a 5,4% economic growth projection for 2010, an 188,6% increase in mineral export shipments as well as inflation stability policies through lowering high utility charges as well asÂ increasing industrial production.