THE Bankers Association of Zimbabwe (BAZ) has revealed that some regional and niche international financial institutions are “cautiously” re-engaging with local banks to re-establish correspondent banking relationships, NewsDay Business can report.
Zimbabwe lost over 100 correspondent banking relationships as international banks held back from conducting business with their local counterparts over fears of attracting penalties from the United States Treasury Department, which had placed targeted sanctions on Zimbabwe.
However, in March 2024, the US Treasury Department’s Office of Foreign Assets Control terminated its targeted financial sanctions regime after then US President Joe Biden signed an Executive Order (EO) terminating the national emergency concerning Zimbabwe.
This termination revoked the Executive Order that had been authorised against the country, a move that reopened re-engagement talks for local banks seeking correspondent banking relationships.
Correspondent banking ties help local banks to process international transactions for their customers.
“Zimbabwe had lost several correspondent relationships over the past decade due to compliance concerns and perceived reputational risks and country risk,” BAZ’s recently appointed president, Sibongile Moyo, told NewsDay Business.
“However, some local banks still maintain correspondent banking relationships with US banks and some regional and niche international banks are beginning to cautiously re-engage. A few local banks have secured new correspondent relationships with smaller international banks in Asia, the Middle East and Africa.”
She said there was increasing dialogue with development finance institutions to facilitate structured trade finance and guarantee arrangements that could bridge the confidence gap.
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While the issue of sovereign debt and country risk has been hanging for a while, Moyo revealed that the central bank’s monetary policy statements frequently emphasised stability and foreign exchange management.
This, she added, created a conducive environment for business and attracted foreign capital, which indirectly assured foreign lenders and supported exporters.
BAZ supported these efforts and advocated for a stable banking environment conducive to attracting foreign lines of credit.
“Total public debt reached US$21,2 billion in 2023 (96,6% of GDP), classified as unsustainable and in distress, severely limiting access to international financing. Efforts to convince foreign lenders are largely aligned with broader government and Reserve Bank of Zimbabwe initiatives,” Moyo said.
“These include improving public debt statistics, implementing economic reforms aimed at fostering price, currency, and exchange rate stability, enhancing confidence, and ensuring compliance with Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) standards (leading to removal from the FATF grey list).”
The African Development Bank’s outgoing President Akinwumi Adesina revealed during the bank’s annual meetings in the Côte d’Ivoire last month that Zimbabwe needed US$2,6 billion in bridge financing.
Zimbabwe cannot access traditional lending from foreign lenders due to its huge external debt burden of US$12,2 billion, according to the Treasury.
