Over the last few weeks, the media has taken the initiative to raise areas of concern regarding the Zambian economy. Today, we take the initiative, as we will continue to do, to provide answers to some of the pertinent questions posed to the Ministry of Finance.
Q1. Where is Zambia in terms of foreign reserves and how comfortable is the Ministry of Finance in this regard?
Foreign reserves currently stand at approximately US $3.5 billion from US $2.7 billion which is around 3.8 months of import cover. The goal is to go to 4 months import cover in medium term.
Q2. Where do we stand on International and domestic debt presently considering that we recently acquired another USD$1Bn Euro Bond?
The external debt currently stands at approximately US$4.2 billion including the Euro Bond. At this level the ratio of Debt to GDP is about 17.8 percent of GDP, which is way below the internationally agreed sustainability level of 40 percent. We are however mindful of the need not to fall back in a debt trap and will therefore be careful with any future borrowing to ensure sustainability and investment of any borrowing in high return growth areas.
Q3. It is argued that the people who have taken up the bond issue are not investors but Managers of Hedge Funds or Speculators who are like our local Kaloba traders. They don’t invest in business, factories, infrastructure or education. Their interest is to lend out money at exorbitant interest rate, they do not care on how the money is used. Please clarify this point.
When issuing our bonds, we are very careful in ensuring that we have a correct mix of investors to support secondary trading. In terms of the current bond, we had 84 percent fund managers, 6 percent Pension Funds, 9 percent Banks and others accounted for 1 percent. The nature of Capital markets is that the majority of investors are always fund managers as they have a mix of funds from pensions, savings and other funds from economic players that have reserves.
The use of borrowed funds is up to the Government and is not determined by investors. The investors’ interest is covered by timely payment of interest as it falls due and of the principal amount at the end of the tenure. They are also interested in a stable bond as they make money through trading. The interest rate paid on these bonds depends on market conditions at the time of issuance, the performance of existing bonds of the issuer and conditions in the international market. It is a weighted rate taking into account the above issues.
Q4. How much is Zambia paying in servicing loans currently and when do we start paying for the USD 750 and USD 1Bn bonds? About how much are we going to be paying then and what will be our projected income to sustain the repayment comfortably?
In terms of interest payment we are paying US$42 Million annually on the first US$750 Million Bond and US$82 Million per annum on the new US$1 billion Bond.
The bonds will be repaid back as a bullet repayment in 2022 and 2024 for the US$750 Million and US$1 billion Bond respectively. In terms of preparing for repayment, the Government is in the process of establishing a sinking fund for the Bonds.
Q5. Being almost half way in 2014, how has been the performance of the Copper price on the London stock exchange and what has been our turnover so far from the export of Copper?
Copper price is slowly improving, currently it is just below US $7,000/MT and appears to be adjusting back to end-December 2013 levels of around US $7,300/ MT. Copper earnings in Q1 2014 were US $1,907 Million. In Q4 they were US $1,794.3 Million and in Q1, 2013 they were US $1,772.8 Million.
Q6. In a bid to diversify, what are the most yielding non-traditional exports and what investment is going to the same and the projections in the next 2 years?
In 2013 Highest NTEs were cement and lime (US $234 Million); Gemstones (US $220 Million); Tobacco (US $215 Million); Sugar cane (US $184 Million); Maize (US $151.9 Million); Cotton (US $85 Million). In terms of projections, NTEs have been rising by over 20% per annum and we expect this growth to continue.
Q7. The SI 33 and SI 55 were meant to protect the value of the Zambian Kwacha & externalization of wealth from Zambia respectively, since the revocation two SI what measures are there to protect our Kwacha and our wealth?
The Ministry is currently consulting with the Bank of Zambia, ZRA and other stakeholders on this issue. You may wish to note that the enabling legislation for monitoring Balance of Payments and use of local currency is still in force under the Bank of Zambia Act.
Q8. It has been said, without factual confirmation that shortage of Forex is due to the high import of materials for infrastructure development, currently where does Zambia stand on its trade balance?
Over the first quarter of this year Zambia registered a trade surplus of US $463.9 Million, from US $283 Million in Q4, 2013. In 2013 Q1 the trade balance was US $482 Million. Import growth has been strong. If we compare first quarter imports in 2014, with the corresponding period in 2013, import growth was approximately 18%. On exports, growth was 13% between the first quarter of 2014 and the fourth quarter of 2013. If we compare the first quarter of this year with the first quarter of 2013, then exports grew by 14%. Exports were US $2,976.9 Million.
Q9. What are the projections on the Forex Exchange, do we expect a reversal or further depreciation in the second half of the year.
Bank of Zambia has taken strong measures and we expect that the exchange rate to stabilise and to better reflect economic fundamentals.
The Ministry of Finance will continue to issue regular Treasury Information Briefs to ensure that the public is kept informed about developments in the economy.
The question is why are borrowing in the first place when you could negotiate good terms with the mines who are leaving gaping holes which you will be expected to maintain after they’ve left to avoid earth quakes like in luanshya where the infestors looted the machinery and goverment was left with no option but to sale due to high maintenance costs
In less than a year interest payment for the US$1bn verses the US$750 has gone up by 56%. Some one is being reaped off.
Figures dont lie and from what has been provided our economic fundamentals remain strong and resilient.
we have a positive outlook
Let hear what the opposition say and let them offer alternatives.
i will be surprised if there will be more than 20 comments on this article
this entity called Gen thinks kwati yalikwata sana amano. Brain washed sonofabitch!!! Ati numbers dont lie, which numbers are you talking about. in which world do you live in?
Ka under 5 (HH) please finish the assignment before this Wednesday failure you have to exculpate yourself & come with your parents otherwise you won’t stand 2016.
So if foreign exchange reserves have gone up why has the kwacha been nose diving? And it is not long ago we were been given the excuse that export revenues have been falling because of low copper prices and Scott et al were calling for diversification of our export product mix! And from nowhere we have increased reserves! This is what is called voodoo economics. This is nothing but a desperate public relations exercise.
Thank you Ministry of Finance – this may not be perfect but it is a demonstration of good governance and sound leadership. Some people will insult you because that is how they release their stress but keep the good work. Make this a quarterly habit – dont wait for people to speculate but step forward and inform the people. I used to appreciate the culture remodelling programme by brother Kandeta. The concept was great – we need to convene deliberate spaces to talk about our economy, to offer solutions and alternatives. Just as we have “Let the People Talk or Have Your Say, Ministry of Finance should encourage citizens to make proposals. This is great leadership – we have ideas of what can work, Zambia belongs to all of us. Keep the good work and positive steps such as these
Good governance anf sound leadership on Facebook! !
Foreign reserves stands at $3.5 from $ 2.7b. Give us the period. External debt stands $4.2 from which period. Does sata understand what this means. Let him hold a press conference. You can not explain such serious matters using stupit childish platform like facebook. I personally dont have a facebook account because its for teenagers who dont hold political , econonomic position in this country. Go to radio 1 and give us the state of the economy in the presence of journalists so that they can ask questions.
ZP i am not a govt employee but i would urge you appreciate the effort and engage constructively. Rather than condemn the usage of Facebook which in your opinion is childish, encourage to use other platforms such as radio, TV and the local print media. let us cultivate a positive tone – you have good ideas and recommendations.
By the way ask Sata and Chikwanda how the BLIND access facebook. Next time vote for brains not just political popularity. If Chipimo was at state house, would there be all these jimbos running the country?
These F.OOLS have no idea. Hiding behind technology. You cannot run a country like that. Even UHURU KENYATA who came into office the other day has addressed the nation numerous times. What is wrong with these re.tards?
Your President is dead Intellectually.
Thanks to MoFP fir the Good work. Lets wake Zambians, if Sata can not do it. Great that u ve done it. Let us get United as citizens of Greater Zambia and leave Sata alone.
this is stupidity at it’s highest, facebook now should be our source of news, these are serious issues we need to see the creature behind the keyboard address us openly, so we can have two way communications, ask questions and express our views than being made to believe postings on facebook, not everyone can read and you have to compensate us internet is not free.
Continue this trend of informing the public with authentic data. This will at least minimise or starve an opportunity to those who deliberately want to misinform Zambians who are not able decipher information or distinguish propaganda form truth. These bad people may not even be Zambians.
THERE IS KNOW ONE MISINFORMING ANY ONE.YU DO NOT NEED TO BE TOLD THAT THE ECONOMIC SITUATION IS BAD IN ZAMBIA.HOW CAN A FAMILLY MAKE A MONTHLY BUDGET WHEN PRICES OF COMMODITIES ARE RISING EVERYDAY.EVEN MY GRANDMOTHER WHO NEVER STEPED A FOOT IN CLASS NOW UNDERSTANDS THINGS HAVE CHANGED.SO MY DEAR BROTHERS LETS NOT BURY OUR HEADS IN SAND ,ACCEPT THAT OUR ECONOMY IS GOWING DOWN AND SOMEONE HAS TO TO DO SMETHING TO CHANGE THE CURRENT SITTIUTION .tHE QUESTION WHO AND HOW IT WILL BE DONE?
Ka under 5 (HH) please finish the assignment before this Wednesday failure you have exculpate yourself & come with your parents otherwise you won’t stand 2016.
Educate me if our reserves is 3.5 billion why cant we pay the loans? Then borrow again.
Everything else looks quite good but the issue of monetaring forex outflaws to a point of clipping would be and already existing investors will not be good for a country looking forward to increasing employment and FDIs.So Kandeta advise your boss not to even go there.Lets forget about protectionist measures for now.
Zambians can easily be duped. No wonder this i.diot called Mwango came to power. Even a dog can win an election in zambia. The level of stupidity is too high.
#and you, you call the president a dog, first and foremost you are equally what you call others. Because those who voted for who ever the president may be are Zambians whom you call your parents, Brothers and sisters and you are the product of these parents. So the dogs that you belong to did that then you are a dog too. The problem with contributors on this site is that many are highly emotionally charged. Possibly out of frustrations.They are lack the inner depth of understanding or reflection. If insults/ talking were the end products of work/ solutions to the lost 20 yrs under MMD , all the things that Zambians want could be achievable in a short period.
#and you, you call the president a dog, first and foremost you are equally what you call others. Because those who voted for who ever the president may be are Zambians whom you call your parents, Brothers and sisters and you are the product of these parents. So the dogs that you belong to did that then you are a dog too. The problem with contributors on this site is that many are highly emotionally charged. Possibly out of frustrations.They lack the inner depth of understanding or reflection. If insults/ talking were the end products of work/ solutions to the lost 20 yrs under MMD , all the things that Zambians want could be achievable in a short period.
How can you engage with Stone Age thinking? Do you honestly expect Chikwanda and Sata from Kaunda age to contribute positively in the economics of the modern world?
In a country with a legacy of stealing by politicians, like Zambia, it amazes me that the report is silent on how the large sums of money the government is raking-in from borrowings is being spent? Having capacity to borrow is no justification for borrowing. Either your government is broke, and that is the reason behind such high level borrowing or you have grand plans in place. Your report is silent on either. Must we assume you are pocketing some of the money you are borrowing and then leave the burden to pay it back to your posterity, long after most of you would have died?
Asking yourself questions and then answer them yourself, how convenient.
The data is skewed and projected to look positive… however, what is happening on the ground is a total different story. Reading through this, you would think Zambia is the new China when reality is completely different.
The questions and answers fail to mention that the economy is not a stand-alone issue; rather it is related to everything else that happens within the country including lack of good governance and rule of law that has direct impact on and investor/consumer confidence. Neglect some of this relationship and your economy is in a mess.
They fail to mention what big projects this borrowing is being spent on; what is the interest rate within the country; positive impact of the falling kwacha on other economic sectors like tourism and exports; etc. They are bent on projecting positive outlook and PR so they cook the numbers and look good. By the way what’s the authenticity of these figures?
They are also not addressing the cost of living and other things like unemployment rate which is what matters to the average person’s ‘economy’.
I also think such reports should be coming from independent experts such as the Bank of Zambia and not a political institution like the MoF. People won’t have confidence in the numbers. Anyway it’s a commendable attempt and this should be happening on a regular basis.