BLOOMBERG reports that Zambia has room to borrow another $1 billion on international markets while keeping debt levels in check, as it seeks to create jobs and cut poverty, says commerce and trade deputy minister Miles Sampa.
The country plans to follow last year’s sale of US$750 million of overseas securities with a US$500 million to US$1 billion offering in 2013, to help finance infrastructure projects, Mr Sampa said in an interview with Bloomberg.
Mr Sampa stated that debt to gross domestic product of Zambia will remain under 40 percent, compared with South African debt forecast to peak at 40.3 percent of GDP in 2016 and more than 100 percent for Italy, Portugal and Cyprus.
Copper reached the lowest level in almost 18 months in London by Monday on concerns, slowing growth from China to the US will curb demand.
Zambia, which the International Monetary Fund said on April 16 that it will expand its economy by 7.8 percent in 2013, relies on copper exports for nearly 80 percent of its foreign-currency earnings.
The country is seeking to tap investor demand (through bonds) that enabled it to increase last year’s offering by 50 percent and Tanzania to lure four times the amount it sought last month. Zambia is considering the sale even as its overseas borrowing costs rise faster than other sub- Saharan African countries, and the kwacha drops.
“Sooner (for Zambia) would be better than later,” Yvette Babb, an Africa strategist at Johannesburg-based Standard Bank Group Ltd. (SBK), the continent’s largest bank, told Bloomberg.
“There would be a concern from the investor community at the pace that the government is raising debt.”
The average yield on African dollar bonds has dropped nine basis points over the period to 4.57 percent, while developing-nation debt on average yields 4.9 percent, according to JPMorgan Chase & Co. indexes.
Zambia is seeking to fund road, rail and power projects to help lift its 13 million citizens out of poverty. The Kwacha weakened 0.6 percent to 5.355 per dollar on Monday in Lusaka, extending its decline this year to 3.1 percent.
Higher relative yields helped Zambia draw 24 times more demand than it sought when marketing notes in September to investors in London and the US, spurring other African countries including Kenya, Angola and Tanzania to consider international bond sales.
Rwanda, which started roadshows this week for its debut Eurobond may boost the size of its US$400 million offering to meet demand, according to London-based Exotix Ltd. Tanzania’s private sale of US$600 million of bonds in March was four times oversubscribed.
“The international liquidity window is open and ripe and may not be there forever,” Mr Sampa said in the April 16 interview. “It’s a question of striking while the iron is still hot.”
State-owned companies, including the power utility Zesco Ltd, the Road Development Agency and Zambia Railways Ltd have said they plan to sell their own bonds totaling as much as US$4.5 billion.
The finance ministry would rather raise the money on behalf of the companies and then distribute it, Mr Sampa said. “We do not want a free for all.”
A debt level of 40 percent of GDP may be “somewhat excessive” because of Zambia’s dependence on copper, Razia Khan, the head of Africa economic research at Standard Chartered Plc in London, said by phone on April 17. The country currently has a debt to GDP level of about 30 percent, according to Mr Sampa.
Zambia will on July 1 implement a law allowing the central bank to monitor foreign currency flows, Mr Sampa said.
The rules, will require exporters to bank foreign currency with Zambian lenders, and will “strengthen” to below 5 per dollar.
The finance ministry will consider hedging contracts for “a fraction” of future foreign-currency bonds, Mr Sampa said. It’s not planning hedges for existing debt and will start putting dollars into a sinking fund once the nation’s Eurobonds are in their third year, he said.
“Scenarios at the moment don’t warrant a currency swap,” Mr Sampa said. “These concerns on the Kwacha and copper are only in the short-term, the prognosis looks good for copper and the Kwacha in medium- and long-term.”
Putting in place a currency hedge on foreign-denominated debt would be a “prudent strategy,” given fluctuations in the Kwacha and copper prices, said Standard Bank’s Babb.
Zambia doesn’t really have room for another $1bn unless we get the right people with businesslike mind to manage the funds in govt.Afterall Nigeria also has room to borrow billions but hasn’t done so bcoz they know the rotten way they manage public funds.They lack capacity to manage but not to borrow.
This is soon going to entrench us in the similar Vulture Funds issues. This is a covert Privatization scheme!! PF really has no heart for this nation, no Vision whatsoever! We are headed for doom!
@Enka, Very Good observation…Capacity to manage is the issue and not to borrow…it seem Sampa is doing more of finance than commerce work, or is it just publicity issues!!
Culture of borrowing is deep rooted…sad
MAN, JUST GO AHEAD AND BORROW THAT US$1 BILLION AND USE IT FOR BUILDING MORDEN ELECTRIC-DRIVEN TRAINS ACROSS THE COUNTRY. WHY ARE YOU WASTING OUR TIME. AS LONG AS MONEY WILL BE USED ON DEVELOPMENTAL PROJECTS IT MUST BE BORROWED.
Borrow? Why can’t you deceitful people reintroduce Wind- Fall tax instead as you promised?
WHY NOT BORROW FROM WINDFALL TAX. MAGANDE DID IT.
PRIDE ?
EVEN WITHOUT WINDFALL TAX YOUR MINES ARE THREATENING EMPLOYMENT AND THE REST. SO WHAT ARE U ACHIEVING.
Fat Face Sampa is plunging Zambia back into debt which will interfere with the free emerging economy
Really this crap theres no where where borrowing is good even in small ammounts dull people
miles sampa is driving this country into the sewer, problem is that he thinks he has got the monopoly of wisdom.akaponokafye bwino
Maggot Sampa is nephew to Sata, and he has a right to do what he wants to Zambians.
But those who knew him at FAZ, they will tell you who pompous and childish that guy is.
Miles Sampa misses the the post of Deputy Minister of Finance. See, he speaks like a Deputy Minister of Finance. Please Sampa realign your thinking to Trade, Commerce and Industry
Ya right Miles, borrow more billions, put more money in your bottom-less PF pockets, disappear after 5 or 10 years, and let the long suffering Zambians pay back the debt. We will then have another SAP and HIPC and start all all over again. That, Miles, is just brilliant.
I think Africa as a whole is trapping itself into debt once again. And the future will be rougher for citizens paying back these debts. The so-called developed world have no better returns now than puting money in the banks – even in Zambia, Botswan, SA, banks do not offer any meaningful investment; so the best option is ‘risk free’ African countries, as they ‘cannot’ wind up. Be careful Government of the Day (god)!
Miles u never cease to amaze me, a billion. So that u can fund more by-elections.
Be ashamed that we always borrow instead of making our own cash.
Satanomics is working
by the time PF is through with this boring Zambia will be back full time in the HIPC zone, this time around for good
Borrowing for their pockets. Dochi kubeba for real
HAND TO MOUTH.
KAPONYA STYLE.
Where is the finance minister for Sampa to assume the role of one? They just wnt to make themselves rich and leave Zambians in Debt once they depart to the other side.
Can someone help. Why bollow $1 when you have $2.4B in the reserve as purpoted by the President. You get $1B and you have 2.4 sitting make me understand.
Chib, I think I can help you understand the point of the reserves. You see, the Dollar is the reserve currency, meaning every country in the world has to have some Dollars as a base (support) for its currency. So the $2.4 Billion represents the Kwacha in circulation in Zambia. So if the Government prints more than the Dollars in Reserves, we tend to have a weaker Kwacha compared to the Dollar and when the US Fed prints more Dollars (QEs), our Kwacha appreciates against the Dollar assuming our Government does not follow suit in printing Kwacha.
All countries have to have Dollars and those, like Saddam, Assad, Iran and our very own Gadhafi, who have attempted to replace the Dollars in their reserves with Gold or the Euro have had “trouble” doing so.
Hope this helps.
I am sure they do not really care about the negative consequences of this borrowing since they’ll probably not be in office when the debt falls due for repayment. God help our nation.
Borrowing is one thing, managing that borrowing is quite another. These Muchingans are good at the former and awfully pathetic at the latter.
Miles Sampa speaks at 1000 revs per minute while rapidly blinking simultaneously. A symbol of lying.
Kikikikikikiki. Hahahahahaha……kekekekekeke…. You my dear have killed me. Say that last part for me. I wish I could hear it over the phone. Now Miles will speak slowly and stop blinking….kikikikikikiki
Deuteronomy 28 vs 44 He shall loan to you, and you shall not loan to him. He shall be the head, and you shall be the tail.
Goncaves enjoying email here. I think LT you would have now sorted your issue of emails landing into wrong people. Have been hacked by the Government?
10 emails at my disposal and they work. I would like to suggest the to use one email for everyone.
For decades Zambia failed to pay US$6bn it borrowed from the IMF and World Bank.
Copper prices have started to fall on the world market.
I do not think these Matero graduates know what the are doing.
Thank GOD i do not live there
I JUST HOPE THIS WONT LAND US INTO THESE PEOPLE MINING OUR COPPER FOR FREE IN FUTURE WITH AN INTENTION OF RECOVERING THEIR MONEY!!!
Look at that sly look on the man toasting with Miles. As if he is saying I love it when you come to borrow….
WHAT IS MILES SAMPA NWE MANDATE AS DEPUTY MINISTER OF COMMERCE AND INDUSTRY?
do not give LT your real email address please
The caption should read : Oh Miles, we are going to screw you over, just keep borrowing more $$$ you can’t pay back because your policies (as govt. are pretty ) self immolating…
This is just going to take Zambia back to the Stone Age. After we had our crippling cancerous debts written off few year’s ago, this government intends to borrow more. This money will end up in the Pocket’s of a few in The ruling party, whilst the common Zambian wallows in muck. The Debt’s we previously incurred in the Kaunda days did NOT Develop Zambia, but The Ruling Classes. Stop this FRAUD Now!! I SMELL CORRUPTION, & i am Allergic to it.