The Bankers Association of Zimbabwe (BAZ) has committed to improve access to letters of credit (L/Cs) as one of a range of agreements reached by the Reserve Bank of Zimbabwe (RBZ - central bank) Zimbabwean and business leaders to deal with apparently unjustified jumps in black-market exchange rates by improving the effectiveness of the formal banking and business sectors.

Despite an L/C facility from the African Export Import Bank (Afreximbank) and repeated assurances from RBZ governor Dr John Mangudya that L/Cs would become easier for businesses to obtain, companies are still finding them difficult to obtain.

Commitments

The agreements reached this month between businesses and RBZ include the central bank committing to regularly monitor monetary and foreign exchange developments to ensure the exchange rate remains stable, to continue using the auction system and to ensure that delays between successful bids and allotments of foreign currency are eliminated.

As well as committing to making L/Cs more available, BAZ also agreed to enhance reporting of suspicious transactions, promptly implement regulatory directives on freezing of bank accounts for participants in illicit foreign currency transactions and promote confidence in the banking sector by clearing the foreign currency backlog promptly.

Afreximbank support

Importers have faced difficulties obtaining L/Cs in Zimbabwe for some years, despite the announcement in February 2019 that the Afreximbank would provide a revolving US$255 million L/C facility to Zimbabwe for imports of critical raw materials for the production of edible oils, fuel, fertilisers and pharmaceuticals.

Afreximbank also provided in 2020 documentary trade finance training in Zimbabwe to 44 participants from 15 commercial banks, RBZ and one non-bank financial institution. The training course focused on the central bank issuing L/Cs for essential imports including fuel and grain (DC World News, 12 June 2020).

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.