Foreign insurers reject Zimbabwe's letters of credit

Zimbabwe's risk profile took a heavy knock following last week's violent demonstrations organised by opposition parties, non-governmental organisations and civil society actors, amid revelations some foreign insurers are now declining to provide for cover letters of credit issued by local banks.
Letters of credit are issued in place of a cash payment to a supplier.

In the case of Zimbabwe, the central bank has been allocating foreign currency through LCs to local companies for the settlement of foreign obligations such as the importation of raw materials critical for industrial production.

In the process, local banks issue a letter of credit using foreign lines of credit usually with another bank in a foreign country, which has foreign currency reserves.