“Borrowers Should Keep an Eye on Interest Rates” – Dr. Zab

Louis Zabaneh

The issue of its effect, if any, on existing domestic interest rates was also raised by the opposition.  Senator, Doctor Louis Zabaneh referred to interest rates from a decade ago to draw an illustration.  While interest rates are pretty much the same since 2009, they are still considerably higher than in other economies.

Dr. Louis Zabaneh, Senator, P.U.P.

“With regards to this Deposit Insurance Bill, I’d like to point to one of the, I think, important areas that we should at least keep an eye on and that’s the interest rates.  We want to ask the question, whether or not the increase in cost to the banks to cover these deposits will have any kind of an adverse effects on our interest rates.  Our interest rates spread back ten years ago, in October 2009, based on the Central Bank information, we had a spread of about 7.89% of which the lending rate was around 14%.  Today the spread is pretty much the same about 7.52%, but the lending rates have fallen considerably, alright.  So we recognize that and that’s a good thing for the economy; however, that eight to nine percent is still significantly higher than what we see in other economies where the lending rates in those countries are in the vicinity of four to five percent after taking into consideration country risk, etc.  So the productive sector especially, and this also impacts personal households, ought to be asking the question, how will this impact the lending rates?  Because we don’t want a reversal of the cost to companies or the cost to consumers with interest rates rising.”