THE Bulawayo City Council says the 200 percent interest rate charged by the banking sector is crippling its ability to provide services to residents and other ratepayers as it cannot borrow funds from the open market to replace or repair its ageing infrastructure.
According to the local authority, the steep interest rates, which were introduced by the monetary authorities as part of measures to stem speculative exchange rate volatility in recent months, are prohibitive.
The council said because of the high insterest rates, it cannot borrow to replace or repair ageing infrstacture as well as buy new capital assets.
The non-replacement of assets such as refuse removal trucks has seen the council outsourcing services.
The council said the contractors occasionally review their rates upwards and council is left with no option but to pass on the increases to the ratepayers who are already overburdened.
According to the latest council report, the Bulawayo City Council urgently requires two motorised graders at a cost of US$560 000 and a refuse compactor truck valued at US$200 000.
The council said because of the expensive money on the open market due to the high interest rates, it was resorting to using funds from its estates account to buy the required equipment.
Financial director, Mr Kimpton Ndimande, told council last month that council was failing to cope with
service delivery demands as most of its plant and equipment was old and required urgent rehabilitation, refurbishment or replacement.
“The non-replacement of assets has seen council outsourcing some of its major services such as refuse removal and the arrangement is expensive as the contracted private companies constantly review their rates upwards,” said Mr Ndimande.
Mr Ndimande blamed the non-replacement of equipment on the council’s failure to access affordable loans from banks as a result of the 200 percent interest rates.
In July, the central bank, as a part of a cocktail of policy measures to cushion the public from the negative impact of inflation in the economy, increased bank policy rate from the 80 percent to 200 percent per annum.
The central bank policy rate (CBPR) is the rate that is used by the central bank to implement or signal its monetary policy stance and provides an indicator of the minimum level of lending rates for banks.
“The economic operating environment is subdued and council is unable to borrow from the open market to acquire capital assets as the minimum lending interest rate is pegged at 200 percent per annum,” said Mr Ndimande. – The Chronicle
