The loss of long standing correspondent banking relationships by leading global banks is beginning to pose significant risks to the country’s efforts to finance international trade, the Bankers Association of Zimbabwe has said.
In a presentation at the Centre for Risk Analysis and Insurance Research breakfast meeting held yesterday, Bankers Association of Zimbabwe (BAZ) representative and ZB chief executive officer Ron Mutandagayi said international banks were de-risking on correspondent banking relationships with local banks and this was posing a significant risk to efforts to access foreign lines of credit.
By July 2017, the country had lost at least 50 foreign correspondent banks since 2008 because of compliance issues and sanctions.At the time, Reserve Bank of Zimbabwe governor Dr John Mangudya said the country had only three correspondent banks facilitating foreign currency exchange and payments.
“There is need to strengthen re-engagement initiatives and processes with multi-lateral financial institutions and cooperating partners and minimise the continuation of de-risking, reduce country risk and improve financial relations,” said Mr Mutandagayi.
Zimbabwean president Emmerson Mnangagwa has since his inauguration speech in November 2017, emphasised the need to re-engage the international community in order to access funding.
“I stand here today, to say that our country is ready for a sturdy re-engagement programme with all the nations of the world. As we bear no malice towards any nation, we ask those who have punished us in the past to consider their economic and political sanctions against us.
“Whatever misunderstandings may have subsisted in the past, let these make way to new beginning which sees us relating to one another in multi-layered, mutually beneficial ways as equal and reciprocally dependent partners,” said President Mnangagwa.
Mr Mutandagayi said: “There is need for the normalisation of relations (which) will also extend to embrace strengthening of cooperation with the international financial community, central of which is the arrear clearance process with the World Bank, and the African Development Bank. Speaking at the same meeting, Finance and Economic Planning Minister Patrick Chinamasa said the country’s arrears clearance plan is still on course. Mr Mutandagayi also said there is need to sort out the agriculture sector in particular clearing any outstanding issues around the 99 year lease agreements.
“There is need to sort out the agriculture sector in particular clearing any outstanding issues around the 99 year lease agreements, which would ensure that traditional private partners and bank funders of agriculture become less hesitant to develop fully supportive facilities for the new farmer, necessitating adoption of collaborative financing models by Government and the private sector,” he said.
Commenting on the cost of doing business in relation to banks, Mr Mutandagayi said banks should undertake a self-introspection on how they can reduce the charges.
“The high interest rates and bank charges, given the US dollar environment and experiences of other countries during the global financial crisis is one of the factors driving the high cost of doing business in the country. In light of this identification the Banks should undertake a self-introspection on how they can reduce the charges,” said Mr Mutandagayi.