Zimbabwe is starved of access to foreign finance and only has three international banks availing credit to the country due to isolation and sanctions that Western countries imposed, the central bank said yesterday.
Most of the economic challenges the country is facing which include struggling to service debts and stunted economic growth are linked to the embargo.
Having adopted multiple foreign currencies in 2009, Zimbabwe has struggled to keep the multi-currency system in place as it does not have access to direct support from multilateral and other international financial institutions.
Reserve Bank of Zimbabwe Governor, Dr John Mangudya said the isolation had seen the country struggling to service its huge debts as well as lose support of 50 corresponding international banks in the past decade.
“Zimbabwe is a very isolated country. We only have about two or three banks throughout the whole world than can finance us. The rest see Zimbabwe as a high risk country, as a result our access to foreign currency is so minimal,” he at a University of Zimbabwe organised business and media symposium.
“Other countries have access to foreign finance but Zimbabwe cannot access because of isolation and sanctions and that is a fact. Between 2008 and to date, we have lost about 50 corresponding banks as a country because of compliance issues and sanctions.”
The corresponding banks were international financial institutions that provided services such as wire transfers, business transactions, accepted deposits and gathered documents on behalf of local banks.
Dr Mangudya said challenges such as cash shortages and unemployment were symptoms of an economy that was not properly functioning. Zimbabwe has for the past two years battled shortages of the United States dollar, the main currency used for day to day transactions, which the central bank said can only be addressed by solving the country’s fiscal deficit, trade deficit, consumptive spending and market indiscipline.
“The contradiction is we are using other people’s currencies but have no access to foreign finance, so it means we need to generate it, we need to make it ourselves,” he said, adding it was imperative that the country boosted export and cut on unnecessary imports.
With industries closing and scaling down operations, unemployment is high. Dr Mangudya said the country had prematurely dollarised in 2009 when it did not have the correct fundamentals in place.
“If it was in the context of building, we were supposed to have what is called a special foundation,” he said.