Zimbabwe rebuilds correspondent banking ties

The Bankers Association of Zimbabwe (BAZ) has confirmed that some regional and niche international financial institutions have begun cautiously re-engaging with Zimbabwean banks, following the lifting of United States financial sanctions last year.

The move comes after Zimbabwe lost more than 100 correspondent banking relationships over the past decade due to the country's placement under targeted sanctions by the US Treasury Department, which deterred global banks from dealing with their Zimbabwean counterparts over fears of regulatory penalties.

In a major policy shift, the US Treasury's Office of Foreign Assets Control (OFAC) terminated the sanctions in March 2024, after then US President Joe Biden signed an Executive Order ending the national emergency concerning Zimbabwe. The revocation of the sanctions opened the door for Zimbabwean banks to re-establish critical correspondent banking relationships, essential for facilitating international transactions.

BAZ president Sibongile Moyo confirmed that although re-engagement remains cautious, the momentum is building.

"Zimbabwe had lost several correspondent relationships over the past decade due to compliance concerns and perceived reputational and country risk," Moyo said. "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."

She added that several local banks had already secured new correspondent relationships with smaller international banks in Asia, the Middle East, and Africa. There is also growing dialogue with development finance institutions to structure trade finance and guarantee mechanisms to bridge the confidence gap that remains among many potential foreign partners.

Despite the progress, Zimbabwe's high public debt and legacy of financial instability continue to complicate full re-engagement. The country's total public debt reached US$21.2 billion in 2023 - 96.6% of GDP - and has been classified as unsustainable and in distress. This severely limits access to traditional international financing.

Moyo acknowledged that the central bank's efforts to stabilise the exchange rate and improve monetary policy communication had helped improve the business environment and attract investor interest.

"The Reserve Bank's focus on monetary stability and foreign exchange management has reassured some foreign lenders and supported exporters," she said.

She also cited broader government efforts to reform debt management, enhance price and currency stability, and improve compliance with international Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) standards. These steps recently led to Zimbabwe's removal from the Financial Action Task Force (FATF) grey list.

The African Development Bank (AfDB), which is playing a leading role in Zimbabwe's international re-engagement, has also weighed in on the country's financial needs. During the AfDB annual meetings held in Côte d'Ivoire last month, outgoing president Akinwumi Adesina stated that Zimbabwe required US$2.6 billion in bridge financing to clear its debt arrears and unlock access to concessional loans and private capital.

Zimbabwe's external debt stands at approximately US$12.2 billion, according to the Treasury. This debt burden has effectively shut the country out of global financial markets for over two decades.

As Zimbabwe cautiously navigates its return to the international financial system, BAZ continues to push for reforms that build confidence, strengthen regulatory compliance, and create a stable banking environment capable of supporting economic recovery and growth.