A STUDY by the Absa Group has ranked Zimbabwe, Ethiopia and Mozambique as the most difficult countries to access foreign currency due to stringent capital restrictions.
While Zimbabwe has been using a dual monetary system with the United States dollar now accounting for over 75% of transactions, experts say getting credit in hard currency remains a toll order.
The study which consulted more than 50 institutions across Africa including central banks stock exchanges regulators and market practitioners, was supported by United Nations Economic Commission for Africa. It shows that Zimbabwe has one of the least developed financial markets on the continent.
The index shows that despite being lowly ranked, Zimbabwe this year improved to position 17 out of 28 on the rankings from 19 last year after aggregating the weights of the six pillars — market depth; access to foreign to foreign exchange; market transparency, tax and regulatory environment; capacity of local investors; macroeconomic environment and transparency and legal standards and enforceability.
South Africa remains largest and most advanced market.
According to the 2023 African Financial Markets Index (AFMI), at position 28 Zimbabwe is bottom ranked in terms of access to foreign exchange.
The first real estate investment trust was listed on the Zimbabwe Stock Exchange in November 2022. The report shows this helped the southern African nation improve on its rankings.
“Alongside having adequate reserves and a developed interbank market, having few restrictions to international capital flows is key to improving access to FX,” the report shows.
“Ethiopia, Mozambique and Zimbabwe remain the lowest scorers due to their broad-based and stringent capital restrictions.”
Absa Group Limited is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups.
Now in its seventh year, the Absa Africa Financial Markets Index evaluates countries’ financial development based on measures of market accessibility, openness and transparency.
The index has become a benchmark for the investment community to gauge African countries’ market infrastructure and is used by policymakers to learn from developments across the continent.
“Among the biggest improvements in the overall score were Zimbabwe and Rwanda, rising by almost 2 points each, linked to progress in building sustainable financial market frameworks,” the report says.
“Zimbabwe has added climate risks to financial stability regulation while Rwanda is working with multilateral organisations to improve market standards for green investments. Overall, 20 AFMI countries now incorporate environmental, social and governance-linked financial policies, which can help to mobilise new investment.”