Renewed Hope for Zimbabwe’s Banking Sector as Correspondent Relationships Re-Establish
Natalie Nyathi
In a positive development for Zimbabwe’s financial landscape, the Bankers Association of Zimbabwe (BAZ) has reported that some regional and niche international financial institutions are cautiously re-engaging with local banks. This change follows the lifting of U.S. sanctions that had previously hindered vital correspondent banking relationships.
Over the past decade, Zimbabwe lost more than 100 correspondent banking relationships, mainly due to international banks’ fears of penalties from the U.S. Treasury Department. These concerns were tied to targeted sanctions on Zimbabwe, which made global institutions hesitant to do business with local banks.
A turning point came in March 2024 when the U.S. Treasury Department’s Office of Foreign Assets Control officially ended its sanctions regime against Zimbabwe. This decision followed an Executive Order signed by President Joe Biden, which revoked the national emergency designation linked to these sanctions. As a result, this opened doors for renewed engagement between Zimbabwean banks and their international counterparts.
Sibongile Moyo, the president of BAZ, emphasized the challenges faced by local banks, stating, “Zimbabwe had lost several correspondent relationships due to compliance concerns and perceived reputational risks.” She noted that some local banks have kept ties with U.S. institutions, while others are starting to establish new connections with smaller international banks in Asia, the Middle East, and Africa. These correspondent banking relationships are important for local banks as they enable international transactions and trade, enhancing their operational capabilities.
BAZ is hopeful about ongoing discussions with development finance institutions aimed at fostering structured trade finance and guarantee arrangements. These efforts are meant to help rebuild confidence in Zimbabwe’s banking sector, which has faced significant challenges, especially regarding public debt. As of 2023, Zimbabwe’s total public debt reached $21.2 billion, representing 96.6% of GDP, a figure classified as unsustainable. This high debt burden complicates access to traditional financing. Recent monetary policy statements from the Reserve Bank of Zimbabwe have stressed stability and better foreign exchange management, creating a more favorable environment for business and reassuring foreign investors.
Moyo highlighted the importance of ongoing efforts to improve public debt statistics and implement economic reforms aimed at stability. Compliance with Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) standards is crucial for Zimbabwe to be removed from the FATF grey list, which would make it more appealing to international lenders.
Despite these challenges, there is growing optimism in the financial sector. The African Development Bank’s outgoing president, Akinwumi Adesina, recently indicated that Zimbabwe needs $2.6 billion in bridge financing to facilitate deeper financial engagement. This funding is essential for stabilizing the economy and attracting foreign investment.
BAZ supports the ongoing initiatives by the government and the Reserve Bank to create a stable banking environment that can attract foreign credit lines. Such efforts are important for revitalizing the banking sector and promoting economic growth in Zimbabwe.
While challenges remain, the cautious re-engagement of regional and international financial institutions presents renewed hope for Zimbabwe’s banking sector, paving the way for potential recovery and growth in the coming years.