Finance Minister Alexander Chikwanda has told parliament that the only way to overcoming the depreciation of the Kwacha is to grow the economy so that the country can export more. Mr Chikwanda told Parliament today that the other alternative is to reduce on imports.
Mr Chikwanda lamented that Zambia imports almost everything including juices, when the country has the right climatic soil conditions to grow the ingredients from which juice is produced, adding that given the state of the economy now, the Kwacha may even be slightly overvalued.
Mr Chikwanda said that improving foreign exchange earnings and diversifying the export base is the only way to stabilize the Kwacha.
Finance Minister said further said that government continues to encourage export diversification by supporting sectors such as energy, agriculture, tourism and manufacturing.
Mr Chikwanda has further stated that all the money Government is borrowing on the international is invested in growth promoting projects in the various sectors of the economy including agriculture and energy.
Mr. Chikwanda was responding to a question raised by MMD Mbala MP Mwalimu Simfukwe who wanted to find out what the value of the two Eurobond loans, in Kwacha, was, at the time of borrowing; and in February, 2015.
He has however bemoaned the country’s poor work culture which he describes as adverse, and makes it difficult to ensure the borrowed funds are used to grow the economy.
The Finance Minister states that to him, what is more worrying is not the fiscal deficit, but the commitment and integrity deficits.
Mr. Simfukwe also wanted to know what the increase there is in terms of interest payable in Kwacha between the time of borrowing during the same period was and what measures government has taken to mitigate the increased Kwacha-value payments in view of the weakening Kwacha.
However, the Minister explained that at the time of borrowing the US$750 million bond was worth K3,825 billion while the US$1 billion was worth K5.5 billion.
Mr. Chikwanda said if the bonds were issued in February this year, they would collectively be K11.81 billion.
He further said government paid K149,676,281 in March this year after it attracted interest amounting to K40, 453, 530.
He added that government paid K578,246,500 on the US$1 billion bond which was settled but attracted two interest rates.
He however, assured that his ministry has been undertaking various measures to tighten monetary policy in an effort to strengthen the Kwacha.
The Minister cited the raising of the minimum reserve requirements for commercial banks from 14 to 18 percent.
Yesterday, Zambia was successfully issued a US$1.25 billion euro bond for infrastructure development.
The Eurobond, with a coupon rate of 8.97 per cent, has an eleven-year average life with repayments in 2025, 2026 and 2027.
Finance Deputy Minister Christopher Mvunga, who led the Zambian delegation, said this success demonstrates confidence that the international financial community has in Zambia and President, Edgar Lungu’s leadership.
Mr. Mvunga emphasized that the Government would strictly adhere to the programmed use of the resources and that this was an opportune time for Zambia to issue bonds given the anticipated rising interest cost in the international markets in the near future.
The deputy Minister said going forward, Zambia would conduct annual investor meetings to ensure transparent communication of the performance of her economy.