HARARE, July 12 (Xinhua) -- Zimbabwe has lost the support of 50 international banks in the past decade due to Western sanctions, central bank governor John Mangudya said Wednesday.
With now only three international banks are availing credit to it, Zimbabwe had become starved of foreign finance to develop its stuttering economy, Mangudya said.
The international financial institutions provided services such as wire transfers, business transactions, accepted deposits and gathered documents on behalf of local banks, Mangudya said.
"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," the governor was quoted as saying by state-run news agency New Ziana.
He said Zimbabwe's current economic challenges were emanating from the Western sanctions.
Zimbabwe adopted multiple foreign currencies in 2009 after its currency had been rendered worthless by a decade of hyperinflation.
However, the country is struggling to keep the multi-currency system in place as it does not have access to direct support from multilateral and other international financial institutions.
Out of the nine currencies in the multiple currency basket, the U.S. dollar has become the dominant currency but it is now in short supply due to low exports and externalization, according to the government.
Local bond notes introduced by the central bank last November have failed to tame a cash shortage gripping the economy.
Mangudya said the cash shortages can only be addressed by solving the country's fiscal deficit, trade deficit, consumptive spending and market indiscipline.
He added that Zimbabwe prematurely dollarized in 2009 before putting correct fundamentals in place.
"If it was in the context of building, we were supposed to have what is called a special foundation. We should not have opened up the economy the way we did," Mangudya said.
Meanwhile, the governor was quoted by the local media Wednesday as saying that the central bank was looking at increasing the 200 million Afreximbank facility backing the bond notes.
The notes are trading at par with the U.S. dollar and the central bank has disbursed 160 million bond notes so far.
Media reports say some of the bond notes are being traded in Zimbabwe's neighboring countries, contributing to the ongoing cash shortages. Enditem
