The Reserve Bank of Zimbabwe received a major boost today when it received US$100 million from the African Import-Export Bank to enable it to bring back the interbank-market which will also enable the central bank to influence interest rates. Lending between private banks stopped when Zimbabwe phased out the Zimbabwe dollar in 2009 resulting in the central bank losing its role of bank of last resort. Banks also faced a liquidity crisis with some banks, especially foreign-owned ones having excess cash while others, mostly indigenous, failed to meet the cash demands of their customers. Interest rates were also distorted with savings attracting as little as 0.15 percent while lending was as high as 35 percent. The new facility will allow banks to borrow from each other through the central bank which will set an overnight accommodation interest rate which would act as the benchmark for interest rates. The move could also restore the public’s confidence in the banking system as most people were opting not to bank their money because they would not get it when they wanted it.
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