The negative outward country perception is fast plunging Zimbabwe’s financial markets into further disarray following the recent notices by South African intermediaries to seize the supply of United States Dollars (USD) to local banks at a time the economy is short of essential commodities such as fuel due to scarcity of the greenback.
The US government recently hit Zimbabwe with fresh sanctions following alleged human rights abuses since the President Emmerson Mnangagwa administration came to power in November 2017.
But for economic analysts, its the contagious effects of the various statutes contained in the Zimbabwe Economic and Democracy Recovery Act (ZIDERA) imposed on the country by the US government that is likely to aggravate the scarcity of USD notes and likely to cripple financial markets.
Local banks Nostro Accounts are literally empty, so are export receipts to liquefy bank Nostros.
This has led to most companies failing to secure United States Dollars to pay dividends to external investors.
“With South African FNB, being the sole intermediary left supplying local banks with USD notes, until recently when it gave notice to stop supply, Zimbabwean banks find themselves at crossroads,” says economic analyst Kipson Gundani.
“What it signals is a continued shrinkage of transaction possibility for our country, because we have been importing most of our notes through South African intermediaries, so if they are now skeptical in dealing with us and we might deny it but these are some of the contagious effects of sanctions regime because one thing the American administration is ruthless about is when it comes to the implementation of the various sanctions statutes leading up to ZIDERA in particular, companies that breach ZIDERA risk seizure of all assets and imprisonment of executives, they are very clear on that and you discover there is a contagious effect even if we don’t have sanctions under South Africa. So you see the severity of this sanctions regime, he said.
However despite the global financial system being broader, offering alternatives to manoeuvre past the American-controlled global financial inter-mediation system, Zimbabwe’s economy is still fragile to create its own foreign currency reserves just like what China did.
Problems are compounded by the fact that when Zimbabwe dollarised in 2009, it did not officialize its monetary system with the US Federal Government to the effect that there isn’t a direct supply of USD into the economy from the Federal Bank.
External banks have since shunned Zimbabwean financial institutions supply of forex through the inter-mediation system for fear of risking reciprocal penalties by the Federal Bank.
In 2017, CBZ was hit with a $385 million fine by the US Treasury’s Office of Foreign Assets Control for acting as an intermediary for ZB Bank which was on the US sanctions list then.
Observers say the solution to Zimbabwe’s financial markets isolation, is for Government to engage the US government.
“We are in a tricky situation because dealing with intermediaries from other countries to access USD notes is now problematic as they too fear penalties. Now we fear its likely going to severe reduce USD notes on the market as local banks are stranded and its further exerts pressure on the exchange rate,” said economic expert Pepukai Chivore.
Zimbabwe’s moribund economy continues to reel from weak exports that have led to the widening of its trade deficit as imports continue to leak massive foreign currency out of its economy.
