GOVERNMENT plans to create a single account for all its departments in order to reduce the cost of borrowing and a way to benefit the private sector, Minister of Commerce, Trade and Industry, Felix Mutati has said.Mr Mutati said in Lusaka that the move would in addition, help in the overall reduction of interest rates.
He explained that the cost of borrowing money in Zambia was still high
even for the Government partly because it was forced to borrow its own
resources from commercial banks.
He explained that the move would help Government reduce cost of
borrowing from the commercial banks because all monies would be held in
one single account.
Government was forced to borrow even when it had money held in
different accounts of the same commercial banks by various departments
thereby, allowing the banks to charge high interest rates.
Mr Mutati said commercial banks charged high interest rates because the Government was always borrowing from them.
There are situations when the ministry of Finance go to the commercial
banks to borrow when other Government departments have money with the
same banks, Mr Mutati said.
The banks had kept on raising interest rates even when Government was borrowing its own money.
The reforms that the Government is undertaking is to allow the
ministry of Finance introduce a single account and force interest rates
to come down, he said.
He cited the Tanzanian government which decided to create a single
account for government departments forcing that country's interest
rates to reduce by as low as 50 per cent.
Mr Mutati said the coming of new commercial banks would also help
reduce interest rates because of increased competition in the financial
sector.
The Bank of Bank (BoZ) recently registered the International Commercial
Bank from Malaysia which was given a licence to operate in Zambia.
Other new banks include First National Bank(FNB) of South Africa, EcoBank of Togo and Access Bank.
Mr Mutati said when the banks commence full operations in Zambia, they
would introduce competitive products and that would help reduce the
cost of borrowing especially for the private sector.
Mr Mutati said for the Small and Medium Enterprises (SMEs), the Credit
Guarantee Scheme under the Zambia Development Agency (ZDA) and the
creation of the Citizens Economic Empowerment Commission (CEEC) would
help them access low cost money for investments.
Times of Zambia
Post published in: Economy