Zim hopes to win back lost correspondent banks

Reserve Bank of Zimbabwe deputy governor Jesmine Chipika

THE United States (US) Treasury Department’s removal of targeted sanctions on selected Zimbabwe assets is expected to restore correspondent banking relationships and improve access to fresh credit lines, it has been revealed.

Last month, the US Treasury Department’s Office of Foreign Assets Control (OFAC) terminated its targeted financial sanctions regime.

This was after US President Joe Biden signed an Executive Order (EO) terminating the national emergency with respect to Zimbabwe and revoking the EOs that had been authorised against the southern African country.

Due to the risk factor involved in the enforcement of these targeted sanctions, a lot of businesses could not penetrate or process some payments locked in US jurisdictions.

However, Reserve Bank of Zimbabwe deputy governor Jesmine Chipika said the removal of the economic sanctions meant the release of some funds that were being withheld.

She said this also opened up new lines of credit.

Chipika told businessbigest on the side-lines of the two-day regional conference on factoring, receivables and credit insurance hosted by African Export–Import Bank and the Netherlands-based factoring centre, FCI Academy.

“Now that the sanctions were declared to have been removed, we hope that the constraints will be reduced. But it will take time because I know some of the financiers may not trust this removal of the OFAC sanctions,” she said.

“But we are really hoping that it helps us to keep on saying ‘we are no longer under the economic sanctions so you can deal with us. We are now a safe client’. But it will take time. So, in the meantime, that’s what we are saying. But we have our own African institutions, who are saying we are ready with the facilities to support all African countries.”

She said the focus must be on short-term funding, while the longer-term sources were readjusted in line with the removal of the sanctions.

Last week, OFAC issued a final order towards the removal of the targeted economic sanctions administered by the Treasury department pursuant to the Zimbabwe sanctions programme.

In the order dated April 17, 2024, OFAC removed restrictions related to:

“Administrative practice and procedure, banks, banking, blocking of assets, brokers, credit, foreign trade, penalties, reporting and recordkeeping requirements, sanctions, securities, services, Zimbabwe.”

The deputy central bank boss said the OFAC regime had even blocked the movement of money when the country was engaged in trade.

“I am sure you were hearing that (for)some companies, their money was being withheld in the US or wherever and not coming back to the country when in fact they had done export business," she said.

"Even correspondent banks, for our banks to conduct most of the international payments they need an outside bank to facilitate the payments.

“Correspondent banks were saying ‘you are a dangerous territory, so we will not deal with you’. So now we are saying you can deal with us. We have been cleared to safety.

"So, it may not happen now, but we are hoping that (we) will start getting some back to deal with our banks and facilitate international trade.”

The country has lost at least 102 correspondent banking relationships as international banks held back from conducting business with local banks over fears of attracting penalties from the US Treasury Department.

Correspondent banking ties help local banks to process international transactions for their customers.

Finance, Economic Development and Investment Promotion minister Mthuli Ncube hopes the US’s shift to a new set of sanctions, mostly political, will help Zimbabwean banks restore some of these links.

Chipika said the onus was now upon the local banks to engage and restore the relations with the correspondent partners.

Bankers Association of Zimbabwe president Lawrence Nyazema is on record stating that Zimbabwe had correspondent banking relationships on different currencies.

“Focus is mostly on the US dollar where direct clearing arrangements with US banks are difficult to come by,” Nyazema said.

“Most banks are clearing US dollars through other stronger banks in South Africa and elsewhere.”

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