ZIMBABWE’S Finance minister says Treasury has approached United States authorities to issue an advisory note to international and US-based financial institutions to restore correspondent banking relationships with Harare.
BERNARD MPOFU
The southern African nation, according to Finance minister Mthuli Ncube, has lost nearly 100 correspondent banking relationships after the European Union and US imposed sanctions on the country citing a breakdown in the rule of law after the land reform programme.
“We are not speaking directly to the US banks ourselves but what we are requesting to the US authorities is to issue an advisory note to the banks in the US to say to them look, Zimbabwe is now open for business,” Ncube told local journalists via video link during his World Bank/ International Monetary Fund annual meetings in Washington DC.
“We have lifted all the financial sanctions which have been albatross over the last 20 years through that executive order of initially 2003 that has been lifted and regulations have been gazette. It is to say to the banks do not over-comply unnecessarily. It is not just US banks but global banks. We lost over 80 correspondent banking relationships in the last 30 years.”
The EU and most recently the US has eased the sanctions on previously black-listed state entities but maintained the restrictions on individuals including President Emmerson Mnangagwa accused of violating human rights.
Harare is currently engaged in several diplomatic initiatives to normalise relations with Washington DC and the European bloc.
Zimbabwe has been in arrears with international financial institutions since the turn of the millennium and has a debt overhang of nearly US$20 billion.
Experts say this has worsened the country’s risk profile, often resulting in usurious interest rates on offshore loans.
Correspondent banking is a bilateral arrangement, often involving a reciprocal cross-border relationship in multiple currencies.
A correspondent banking arrangement involves one bank (the correspondent) providing a deposit account or other liability accounts, and related services, to another bank (the respondent), often including its affiliates.
The arrangement requires the exchange of messages to settle transactions by crediting and debiting those accounts.
Correspondent banking enables domestic and cross-border payments. These relationships facilitate a range of transactions and services, including the execution of third-party payments, trade finance, the banks’ own cash clearing, liquidity management and short-term borrowing, or funding investment needs in a particular currency.
In the most traditional form of correspondent banking, a respondent bank enters into an agreement with the correspondent bank to execute payments on behalf of the respondent bank and its customers.
