ZIMBABWEAN banks and financial institutions are failing to access international lines of credit because they owe external creditors an excess of $5,5 billion, an official said. Mr Joseph Mverecha, the Bankers Association of Zimbabwe (BAZ) head of strategy, marketing and business development told delegates who attended Wednesday’s international business conference at the Zimbabwe International Trade Fair (ZITF), that the sanctions imposed on the country had a negative impact on access to international finance and trade flows.
He said the high levels of under-capitalisation undermined efforts of the banking institutions to secure trade finance or, to issue bank guarantees for trade purposes.
“External debt payment arrears, currently in excess of $5,5 billion remain the biggest constraint on Zimbabwe’s access to international lines of credit and trade financing,” said Mr Mverecha.
“Sanctions imposed on the country have materially impacted on access to international finance and trade financing flows. Several banks and financial institutions have been affected by sanctions, which have had significant operating constraints, particularly in a dollarised environment.”
He said banks on the US Office of Foreign Assets Control (OFAC) sanctions programme were facing serious challenges, chief among them, failing to trade in the United States dollar, the currency that dominated global trade accounting for 60 percent of global financial transactions.
“Effectively, the sanctions have also made it difficult for the banks to access lines of credit from US dollar financial markets and limited international visa cards to customers. International banking and correspondent relations have also become limited,” said Mr Mverecha.
He, however, said despite the challenges presented by the sanctions, there had been notable progress with some banking institutions being removed from the OFAC listing.
“This has enhanced opportunities for the banks to start new business initiatives, in addition to release of funds frozen under OFAC.
“Measures currently being pursued by he Government to deal with the external debt payment arrears will measurably change the dynamics of access to international capital markets, with positive implications for the banking sector and the economy,” he said.
He added that it was important for banks and financial institutions to receive maximum support as they had an important role to play in supporting private sector projects, as well as policies and programmes that serve the public.
“For the country to achieve maximum economic development, environmental and social investment, our banks need maximum support.
“Unfortunately, the Government does not have enough resources to provide grants and loans for trade facilitation to the private sector including SMEs and micro-enterprises,” said Mr Mverecha.
Zimbabwe, Mr Mverecha added, had direct business ties with the rest of the world through trade and, indirectly through the US dollar currency.
“This implies that global economic developments have a strong bearing on the country’s external sector and therefore the domestic economy.
“The mining sector dominance of Zimbabwe’s exports is evident, with mining exports accounting for an average of 51 percent of total export earnings between 2009 and 2014,” he said.
Mr Mverecha said the marked appreciation of the US dollar against the country’s major trading currencies had further exacerbated the external sector position as this made Zimbabwe’s imports cheaper, while undermining the competitiveness of the country’s exports.