Treasury Fredson Yamba (left) and Bank of Zambia Governor Michael
Gondwe (right) at a media breakfast at Taj-Pamodzi hotel in Lusaka
As the nation may be aware, Zambia successfully issued its third euro-bond on 30th July, 2015. The bond issue amounted to US $1.25 billion at a coupon rate of 8.97 percent.
The final order book reached US $2.5 billion from more than 175 investors from the United States, United Kingdom, mainland Europe and other global markets. The advance interest payment (or discount) on the bond amounted to US $34.3 million.
In terms of geographic distribution the USA took the highest share at 48%, UK took 42%, rest of Europe 9%, and other regions accounted for 1%. By investor type, fund managers took 84%, insurance & pension funds 4%, Banks/private banks 3% and hedge funds 9%.
The repayment of the USD1.25 billion euro-bond will be made in three equal installments of US $416.7 million in July 2025, July 2026 and July 2027.
The choice of amortizing the bond in three equal installments is to reduce the gravity on the Government in amortizing the US $750 million, US $1billion and the US $1.25 billion, bonds.
It is worth noting that despite the strong interest from investors, the Government only issued US $1.25 billion from the entire order book of US$2.5 billion.
This was premised on the need for the Government to subscribe only to those resources that were needed to finance the various infrastructure projects that Government is undertaking across the country, in the transport, energy and social sectors. This is consistent with Government policy of prudent fiscal and debt management.
In order to ensure proper utilization of the funds, the Ministry of Finance will work with the implementing ministries in a coordinated manner to ensure value for money through improved implementation and monitoring of projects.
The latest bond was a success taking into account the fact that it was issued at a time of uncertainty in the global environment, largely due to lower commodity prices and the developments in the Eurozone at the time where Greece’s IMF debt default, added to nervousness amongst some investors.
Further, the appreciation of the US Dollar against other currencies, our Kwacha included, has seen capital slowdown to emerging markets by investors.
Let me conclude by indicating that we are mindful as Government of the need to maintain debt sustainability and in addition, improve upon Zambia’s credit-rating.
In this regard, we factored this new borrowing into our estimates and came to a credible conclusion that we are still sustainable by all major debt thresholds.
Additionally, the use to which the resources are earmarked will in the near term result in higher growth, thereby increasing our ability to service this and other debt generally.
The process of establishing a sinking Fund has also reached an advanced stage and we will start setting resources aside for this purpose from 2016 onwards.
Fredson Yamba
Secretary to The Treasury
MINISTRY OF FINANCE
If Gondwe is BoZ Governor, what is Kalyalaya?
It is not the duty of Fredson to explain the debt PF is incurring, but the President.
Where the F is the President when it comes to economic issues?
How can he Yamba explain the Euro bond, who demanded explanation? People have decided that PF government has to leave in 2016.
We didn’t mention Fredson Yamba will be fired, NO, we said Edgar and his 30% PF MPs will be fired. The other 70% are in another team.
PF you have truly sold off the future generation with acquiring loans every evening. What kind of carelessness is this, there are too many examples of government which have take this route of borrowing without thinking and are in trouble now. The simple reminders are Greece and Zambia before 2004 (debt forgiveness). Really PF do have a heart for this nation and slow down on this roller costar of borrowing for every financial difficult you come across, leave room for the next generation to borrow for themselves.
How can you justify borrowing at such a HUGE interest rate??
While they are at it (explaining the HUGE interest rate) can we have an audited breakdown of the last euro-bonds? Deafening silence followed by cree cree cree (sound of crickets)
If the mines were paying taxes correctly, that is nothing. And Zambians in diaspora should start contributing towards our country’s treasury. They are just yapping, yapping for nothing
Fuseke. contributing to recklessness and corruption?
The intelligence and know how of the economy from this Honourable Man is manifest of the ability by the Treasury to manage the economy prudently for the benefit of all Zambians….. HH, Edith Nawakwi and the LU.NATIC Eric Chanda combined wisdom cant match this Noble Gentleman’s articulation of the State of the Zambian Economy
LUSAKA TIMES …. isn’t that a File Photo
Africans celebrate harvests (or profits) and victories. Just look around ceremonies like Ncwala, Ukusefya pa ngwena, mutomboko etc are all designed to celebrate what we have produced or conquered. Now Africans are being forced to celebrate debt!
Kuya bebele chabe next year. Once we have a new govt, we need a serious/ vicious investigation of how this and the previous Eurobonds were used; serious investigation of how these PF guys have become so filthy rich from nowhere. Nothing like witch hunting. We warn them!
So what exactly did he explain – who the lenders are? What does matter who the lenders are? The rest of the story is already in the public domain.
Iyoo mukatusha munkongole, kabiyeni mucibote
Sometimes I feel like giving up my zambian citizenship because my countrymen particularly politicians love to comment on things they don’t understand. If Zambia doesn’t borrow where will the govt get money to train ICT teachers, build decent and reliable railways? The idiocy I see in some of the political leaders such as Kabimba is frankly annoying. Just look at zambia’s brodband services, internet is as slow as a snail; now do the lunatics commenting on the eurobond know how zambia can improve such infrastructure? Please give us credible arguments or keep your mouth shut. How will the load shedding stop if the government can’t increase capacity? Minister Chikwanda please arrange more eurobonds to improve our backward country.
Lenders differ. IMF and World bank on the international scene can be compared to our CEEC where one can borrow, fail to pay, and renegotiate. Fund Managers are like private banks, who when you fail to pay, go to court to claim, resulting in them grabbing or liquidating whatever property you have, hence the outcry.
Show me a viable alternative to Edgar Lungu, and I will reconsider. But please not under five. From today I have discarded under five, he has disappointed me terribly. But tell me, why does HH possess this propensity to shoot himself in the foot when it matters most?