Finance Minister Margaret Mwanakatwe has clarified that the Zambian government will consult the bond holders of its three Eurobonds before singing up to a refinancing offer from a Turkish firm.
In a statement, Mrs Mwanakatwe stated that government is open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors but that this exercise will be done in full consultation with the bond holders and in accordance with international market standards.
She said if the offer from Turkey crystallises, no unilateral action will be taken by the Government.
Mrs Mwanakatwe said government stands by the commitments made to bond purchasers’ at the time of issuance of the Eurobonds not to take any action without consulting holders of Zambia’s Bonds.
She added that government wishes to emphasise that such an operation is not in any way a signal that Zambia is failing to repay the Eurobonds.
“We remain fully committed to meeting all our liabilities on time and in full. In line with the foregoing, we have developed a redemption strategy for the three Eurobonds,” Mrs Mwanakatwe said.
Below is the full statement
STATEMENT ON ZAMBIA’S RATING & REFINANCING THE 2022 EUROBOND
Zambia last week received its rating assignment from Fitch Rating Agency that re-affirmed its rating at B/Negative Outlook and Moody’s Ratings that assigned a downgrade rating of Caa1 / Stable Outlook.
The Government has noted the ratings and has discussed the issues raised by the Agencies’ analysts.
For the reasons that have been raised in the rating reports, particularly the Moody’s Rating Agency’s report, stakeholders and investors may recall that Government on 14th July, 2018 announced a number of measures.
The measures are swiftly being implemented as part of our broader policy reform to tackle the challenges that relate to debt, liquidity, and the fiscal deficit.
These measures will lead to slowing down the rate of debt accumulation in 2018 and over the medium term and tackling the fiscal deficit which we forecast to be below the 2017 announced deficit of 7.8% of GDP.
Addressing Liquidity Issues
Measures to address tight liquidity in the domestic and external sectors are progressing. These measures include limiting domestic financing of the budget, cutting expenditures particularly as they relate to project financing; the principle driver of fiscal deficits in Zambia, streamlining expenditure on personnel emoluments and reducing the cost of public sector operations.
Further, the Government is proceeding on its strategy to dismantle arrears in the different sectors.
As a minimum, the arrears dismantling provision will be maintained at the current level as it is cardinal to fiscal sustainability and liquidity normalisation.
The Government has also started to implement the policy on completion of projects that are 80 percent and above.
In this regard, the Treasury has released more than K2 billion in two tranches, the latest being K1.3 billion released during the last two weeks, to finance domestically financed projects in this category. This will address the problem of incomplete projects, stop costs in standing time and curtail the accumulation of arrears to contractors that are triggered by partial work being done due to resource constraints.
On the external side, the Government has begun to work on measures to define dedicated streams for reserve accumulation. This is being done side by side with the asset/liability management exercise on external debt and the cancelation and postponement of some pipeline loans.
From the work we have done so far in implementing measures, Zambia’s debt accumulation will slowdown in the next 2 to 3 years. It is projected that we will attain a reduction in debt ratios after 2022.
Given this scenario, fiscal slippages will recede and further, we do not see protracted debt because we will stand firm on our fiscal sustainability measures.
Public Finance and Subsidy Reforms
The Government has progressed on reforms to different legislation that will anchor the fiscal management in law.
Already the Public Financial Management Act was signed into law in April 2018. This law will tackle the recurring problems of fiscal mismanagement through strict sanctions for imprudent management of resources.
The new law places personal responsibility for mismanagement on officers at an operative level, Controlling Officers and other policymakers. The new law also stipulates offences and severe consequences for mismanagement of public funds.
Other legislation related to fiscal prudence will soon be progressed. These include the Planning and Budget Bill and the Public Procurement Law; pieces of legislation that are core to fiscal prudence and responsibility.
Regarding subsidy reform that was causing large fiscal slippages in the past, the Government wishes to update the public that Zambia’s Subsidy reform programme has helped to reign in on the structural challenges that impacted on the fiscal in the past.
These reforms are helping in supporting better growth and attaining budget predictability going forward.
Reforms put in place in 2017 to address Electricity, Agriculture and fuel subsidies have resulted in the Government being able to address costs that resulted in arrears.
So far the Government has through this reform addressed the accumulation of electricity arrears that were costing US$21 million per month. Arising from the reform, the mining sector is now paying 9.3 cents per kilowatt hour for electricity compared to the 5 cents that was being paid by sector players prior to subsidy reforms.
In the agriculture sector, we attained a cost reduction in the last farming season of up to K1.7 billion as a result of the change in the facility transmission mechanism to electronic vouchers. We have also attained and sustained cost reflectivity in fuel prices since the third quarter of 2016. This means that we are no longer accumulating fuel arrears.
Asset/Liability Management
As directed by The Republican President, we are proactively undertaking a rigorous Asset/liability management exercise. Specifically, the Government is advanced in preparing for discussions with the Government of the People’s Republic of China to refinance portions of the Chinese debt, particularly those with a medium-term maturity profile.
This will ultimately create positive and smooth cash flows. A high-level mission will travel to China in August 2018 to firm-up the discussions in order to create positive and smooth cash flows. I will lead the team to China.
Further, Government wishes to shade more light on the statement made by the President of the Republic of Zambia, Mr. Edgar Chagwa Lungu regarding a Turkish Company that is being courted on refinancing the 2022 Eurobond.
Whilst we are open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors, this exercise will be done in full consultation with the bond holders and in accordance with international market standards.
If the offer from Turkey crystallises, no unilateral action will be taken by the Government. We stand by the commitments made to bond purchasers’ at the time of issuance of the Eurobonds not to take any action without consulting holders of Zambia’s Bonds.
Further, the Government wishes to emphasise that such an operation is NOT IN ANYWAY a signal of failure to repay the Eurobonds.
We remain fully committed to meeting all our liabilities ON TIME AND IN FULL. In line with the foregoing, we have developed a redemption strategy for the three Eurobonds.
The strategy is currently undergoing integrity reviews PRIOR TO SEEKING CABINET APPROVAL. Further, the Government is in the process of engaging financial advisors on implementation of the strategy. In so doing however, we are duty bound to interrogate any other asset/liability proposals that may come from other private and bilateral partners, with the proviso that it should be cheaper and procedural in terms of international capital markets operations.
Strengthening Implementation and Information Sharing and Transparency
Whilst rating agencies wait to take our actions into account in the medium term, it remains the firm resolve of the Government that the impact of these measures begin to manifest in 2018 – hence the speed with which the implementation is progressing.
Further, the Ministry of Finance has developed an implementation and progress dashboard on the fiscal prudence, economic stabilisation, and growth measures.
The dashboard is reviewed weekly by top management of the Ministry and progress reports are submitted to Cabinet to ensure that there are no slippages.
The Ministry of Finance will continue sharing with the public monthly reports on the performance of the economy and holding quarterly engagements with a cross-section of stakeholders in order to enhance information availability and exchange.
“Moody’s downgrades Zambia’s ratings to Caa1(Junk investment and high risk of defaulting) due to debt concerns”
Your words and your actions are different. Action speaks louder. So far your actions show contrary to your words.
THE REQUEST TO HAVE THE EUROBONDS REFINANCED IS A CLEAR SIGN OF FAILURE TO PAY THE DEBTS IN TIME. PROF. SAAZA AND DR. FUNDANGA PREDICTED THIS FAILURE A LONG TIME AGO AND THE REQUEST IS A CONFIRMATION OF WHAT THEY HAD SAID. HH HAD SAID IT FROM THE BEGINNING THAT PF HAD NO CAPACITY TO MANAGE THE LOANS, LET ALONE THE ECONMY, BUT THE PF VUVUZELAS ACCUSED HIM OF BEING BITTER AND ALL SORTS OF OTHER NAMES. PF HAS FAILED THIS COUNTRY AND THIS HAS BEEN CONFIRMED BY THE RECENT DOWN GRADINGS. WHAT THE PEOPLE SHOULD DO IS TO REMOVE PF FROM POWER TO LET CAPABLE PEOPLE TAKE OVER.
Of course the government can’t fail to pay back the loans. But the Corrupt elements in State House are seeing a loophole in amassing personal wealth by dubiously engaging Turkey people to steal using the Eurobonds
I dont Understand this Woman … you refinance when you know you are at high risk of default. And this thing of lying to people that refinancing makes it cheaper is a load of nonsense. You are desperately trying to re-engage the IMF for the very reason that you want Balance of Payment support while you service these loans. You have been running a budget deficit and asked for a supplementary … what does that mean? Your reserves are at an all time low what does this mean? By your statement are u saying Zambia can comfortably repay this loan in its current status? If not so isn’t is failure to repay the loan? Madam you failed to Manage a repayment to CEEC of a loan for your failed roofing company business …I think a national loan may be too much for you STOP lying
Nyebo noba suntwe you have troubled us. Why are we facing ALL this??? This is the MOST inept government in the history of this country.
I always thought Margaret was a professional … sad to see what politics does to people.
I Quietly Observed as ECL was driven in his personal BMW 750 iL Executive to Cast his vote with the first Lady … I took interest and checked prices on the Internet found the value at ZMK 2.8 million for this car….. with customization it would be higher. Now if you recall in 2016 ECL net Value all assets including real estate declared, was around ZMK 2.5 Million. Now this is the value of car he rides in. I would like to Urge people to take interest in such things that may even pass your observation like watch someone is wearing … even clothing. These become indicative of how much a leader is losing touch with the people .. given the circumstances we are in this is actually tantamount to impudence. I dont believe any talk from this Minister of Finance and if you dont agree with me I…
Turkey owe Zambia money. You remember you people when Dora was useless Energy minister, she made a deal with Turkey to send a ship of electricity to be locked in Nacala Mozambique?
Even Edgar went to see where a ship will be locked and pump electricity to Zambia to resolve “load shedding”.
In my world, that was an expensive scandal.
You people have short memory.
Let them pay Euro bond.
Can elections be called forward to exit PF and Chakolwa Lungu from the presidency? Lungu and PF are clueless about fiscal and monetary governance and debt management. Lungu failed to run a simple/unsophisticated law office. And he is not absolutely fit to run even a chicken run!
Your have to be daft or gullible as LT Blogger Nine Chale to believe this woman Maggie…of course anything with the word refinancing in it is a sign of lamentable failure and even makes it worse that you are seeking funding from other external sources (A private equity fund company) ..my skin is crawling just to think of the terms of conditions regarding this loan agreement , this reminds of Vulture funds which we worked hard to rid off under Mwanawasa at great cost only to be back in it.
These fooools we have entrusted with are resources are risking everything especially entities like ZCCM, Zamtel, Indeni etc…we told you fooools that Lazy Lungu has no leadership whatsoever but you said we were bitter..this moron is supposed to host a press conference and come out clean, he is happy…
.this moron is supposed to host a press conference and come out clean, he is happy to dance and speak to his dull cadres at campaigns but can not address the nation.
Dept of Hatribes and Hanegatives on the go!
Oh dont talk rubbish…..
But seriously the president should not be in “..hiding mode” in the face of this new scandal.Baba you even want 2021 but choose to ignore issues,dont give us young Amos sir,this is serious…address us that is what a president does you cant just be in campaign mode when the house is on fire….
Always denying..
Just like the way she denies being sh*gged by cadres of the age of her grandchildren at Mayela until she lost her diplomatic passport….and had to tell the whole embarrassing story to the court!
Refinancing should not be an option but fully liquidating the loans from own resources. As Green party has always stated, legalizing marijuana is the only possible solution to the debt crisis
ba Margret just keep quiet we all know the problem that we have found ourselves in…
This is the mistake of electing mere loudmouths like Old man Sata who in turn nominated his fossil of an uncle Chikwanda and then pass the keys to Lazy Lungu. One Chikwanda must be very proud of himself destroying an economy for the second time…he is enjoying retirement and Sata has taken the easy route out.
Jay Jay
What worries me most is that most people have forgotten too soon where our problems came from,it was Sata.He had absolutely no clue of what being a president entailed,but alas today he is the hero of PF.Aftern this annoying experiment is over PF will die a natural death,there will be no money to loot,what a dissapointing lot….
Jay Jay, you are right the prick and his uncle made sure they filled their pockets in the first year in office. We need to quickly “seat up” very soon Zimbabweans will be laughing at how docile we are; easily manipulated, unassertive, easily handled, like putty in one’s hands.
Here is another dull witch in the office of a minister. Of course Zambia needs to refinance the debt because we are failing to repay the Eurobond. If we had the money then why would we have looked around to borrow from Turkey and why are we sending data to IMF for a bail out!
Countries with money dont go out borrowing but go out lending or bailing out those that need money like Turkey is doing to Zambia.
Probably this pro.st.itute was actually drunk when she was saying this sh.it. Do we really deserve such drunkards as ministers?
This is a vulture fund and the Turks know that we are not going to repay…easy way to make money from a desperate entity more like a payday loan but on a bigger scale just say goodbye to ZCCM, ZESCO, Zamtel etc.
We never learn!!
Ba Turkey, tukongosheniko indalama shakulipila inkongole !
Elo nikateka alelande ifyo….how did we get here?
digging a new hole to file an old one
We warned them about borrowing for consumption, what happened to all that money from removal of subsidies, all loans were misused on grossly inflated projects …they are not sonta sonta anymore even that moron who was in the forefront of subscribing these loans Sampa has been elected too continue with his plunder of resources.
Atleast mwanakatwe tries to show transparency unlike lungu……even though she is just covering the patches with more patched up vetenges…….
And LT can you shed some light on the suspension of the ZAF commander ?
ZWD is condemned by PF but ZWD seems to be were breaking news is..
Hatribes.
I Quietly Observed as ECL was driven in his personal BMW 750 iL Executive to Cast his vote with the first Lady … I took interest and checked prices on the Internet found the value at ZMK 2.8 million for this car….. with customization it would be higher. Now if you recall in 2016 ECL net Value all assets including real estate declared, was around ZMK 2.5 Million. Now this is the value of car he rides in. I would like to Urge people to take interest in such things that may even pass your observation like watch someone is wearing … even clothing. These become indicative of how much a leader is losing touch with the people .. given the circumstances we are in this is actually tantamount to impudence. I dont believe any talk from this Minister of Finance and if you dont agree with me I…
Could not have put it any better , but to the PF rats such richers come with being the president…..they even bost that “it rains money around lungu “
What BMW…you really think that’s his BMW that belongs to GRZ, you honestly think he can be allowed to be driven in his own vehicle.
“In a statement, Mrs Mwanakatwe stated that government is open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors but that this exercise will be done in full consultation with the bond holders and in accordance with international market standards.”
GOOD POINTS STRATEGY AND THINKING IT SHOWS THERE HAS BEEN SOME HARD QUALITATIVE ANALYSIS ALSO RETHINKING RETHINKING ABOUT CLUSTER INITIATIVES AND ESTABLISHING A SOVEREIGN WEALTHY FUND IS WHAT IS MISSING IN THIS GOOD POSITIONS AND STANCE TAKEN
A wise man can learn more from a foooolish question than a foooool can learn from a wise answer.
Further, Government wishes to shade more light on the statement made by the President of the Republic of Zambia, Mr. Edgar Chagwa Lungu regarding a Turkish Company that is being courted on refinancing the 2022 Eurobond.
Whilst we are open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors, this exercise will be done in full consultation with the bond holders and in accordance with international market standards
TRY TO BUY BLOCKS AND PAVERS AND SEE WHY NOT THAT ROUTE ALONG KAFUE OR SOS NATURE AND TREATMENT OF WORKERS UKUYUFWA AND PATRONIZING OF STATE SECURITY LOUDLY WITH POMPOSITY SO NO TURKISH REFINANCING OTHER THINGS ARE OKAY FINANCE MINISTER ICHIKWANKA BACHIPANYA KU MUCHIBEMBA
There is worry and concern. Refinancing is repaying back your debt plus interest, not by you but by someone else be it your lender another lender. Then you immediately agree to get a loan bigger than the one you just liquidated and this come with different conditions and interest rate. The second time lender of the refinancing has something he/she wants from you, either to give back the higher loan with its interest or you pay back in kind, and these can only be profitable to the lender. Money and financial transactions is a thick jungle, the looser is anyone who borrows for utter consumption beyond his/her means. I am Ms Mwanakatwe has worked this through but should know that Turkey can not just lend for the sake of it, there are strings attached. The strings are ever in small print…
I highly doubt one Mutati would have been part of a deal like this …Maggie is a drunk that’s why she was picked any smart professional would have stepped down as the only way out of this is increasing taxes its futile to postpone the inevitable. You can not borrow to pay loans its recklessness.
Cochroaches always seem to be the cleverest of all insects.Like wise pf maniacs think they are the most intelligent. Please stick into your pf and continue gnashing your teeth while koswe and all continue grounding your economy to its proverbial knees.
The minister is correct in the statement there Refinancing is different from Refunding Her thinking and analysis very qualitative Refinancing means restructuring the bond taking advantage of the maturity profile and terms taking a view of interest rates This often results in Saving money as opposed to Refunding the Bond holders or holder of the Book as it were Refunding on the other entails repayment on or before maturity the Principal or Interest (Differentiate issues at Premium and Zero)
When you see the yields then you can sympathise with minister to refinance and save time and money
Look at this tin above trying very hard to soothe him/herself with his own folly…busy typing away balderdash..its not a funny sight.
When you see the yield curves over the long-term, then you can agree and follow what the minister is proposing to refinance and save time and money
How old are you…I hope you don’t have children!!
Now the government is engaging in a cochroach dance with the Turkish vulture funds for its redemption and subsequent collapse of the entire country. Watch this space and ask Dr KK.
Let’s develop this thing! One is president, one will NEVER be!
Even non finance Expert can tell that we are even getting into DEEPER TROUBLE with the Turks!! I HOPE these guys have not offered ZESCO AS COLLATERAL for the debt as that is the ONLY VIABLE STATE ASSET THAT IS 100% GRZ!! With new HIGH TARIFFS, the Turks will be VERY HAPPY to take it over, RUN IT and MAKE MORE AND MORE OVER THE OWED AMOUNT and surrender it after all machinery has been worn out!! Let us HOPE that when they say they “HAVE SIGNED AGREEMENTS TO INVEST IN ENERGY” they don’t mean just that- giving away ZESCO!!
“….I HOPE these guys have not offered ZESCO AS COLLATERAL for the debt as that is the ONLY VIABLE STATE ASSET THAT IS 100% GRZ!!…”
I would not be so sure……with these rats lead by lungu no one is sure what they have sold….dont forget they move and sell mukula in the dead of night when they think everyone is sleeping…..
Easy way for the Turks to get their hands on assets like ZESCO…then when they do increase the tariffs…the future is bleak for our children as we never learn from the past!!
Zambia is sinking ship. I feel for the bond holders.
Even Ronald Penza used to speak so eloquently, except that by the time he left office Zambia’s poverty prevalence levels were at 86% as against UNIP’s 54%. His companies began to do very well. It’s difficult to understand what Margaret is saying because who would wish to pay your debts at a lower rate? Fish is smelling
This is damage-limitation by Maggie Mwanakatwe after the clanger dropped by ECL. What advice Lungu took before saying that he was seeking financial accommodation from Turkey I don’t know. But I guess he took it oh, I am the top dog so I’m licenced to say whatever comes to mind. Sorry, bond markets are strange beasts. They can really be a bitch and give you real hell.
Borrowing from Peter to pay Paul. What will you do when time comes to pay Paul? Meanwhile the interest is just rising.
Moody’s downgraded you saying debt is approaching 70% of GDP,forex reserves are just $1.8b and budget deficits of over 7% will continue into the next decade.That’s very serious economic stress.
Thursday, May 24, 2018
EMs with large external funding needs are under pressure. The Turkish Lira is one of the currencies in focus. We present external funding scenarios to assess risk. Given the widening in the current account deficit, we estimate a potentially large reserve drain, even in the absence of a reversal in capital flows.
Thursday, July 19, 2018
Given that Turkey’s challenging external financing and inflation outlook calls for tighter policies, especially considering that global liquidity conditions are set to tighten further, markets will likely test the new economic management team until they have clarity on the direction of policies.
Tuesday, June 5, 2018
We develop a framework to assess the monetary policy stance, that trades off rate hikes versus projected inflation. FX passthrough from Lira depreciation is large, negating tightening effects from recent
Tuesday, April 24, 2018
Markets are turning less friendly towards carry trades, which is weighing on EMs with large external funding needs. Earlier this year we scanned EMs for the greatest vulnerabilities. Turkey’s large credit impulse stands out in our cross-country scan as it widens the current account deficit even as funding deteriorates. Even with the large depreciation the Lira has seen in recent years, our models continue to point to the potential for overvaluation
Monday, April 2, 2018
Strong growth in 2017 came at the cost of a larger current account deficit. Fiscal easing looks likely to continue as elections loom, which could weigh on Turkey’s credit outlook. Ongoing lira weakness highlights the growing risk to the external financing and inflation outlook.
There pitfalls ahead in that Investor Therefore the cost of refinance and terms might not be as we Know Find another Investor in those quality Zambian Bonds not from Turkey
Monday, April 2, 2018
Strong growth in 2017 came at the cost of a larger current account deficit. Fiscal easing looks likely to continue as elections loom, which could weigh on Turkey’s credit outlook. Ongoing lira weakness highlights the growing risk to the external financing and inflation outlook.
There pitfalls ahead in that Investor Therefore the cost of refinance and terms might not be as we Know Find another Investor in those quality Zambian Bonds not from Turkey
DU initial position is and was correct as observed from the terraces as my good friend would say No Turkish deal Made
Koswe is eating zambia inside out
The Finance Minister is not being sincere with Zambians . Refinancing of debt simply means one thing in this instance – inability to pay out the Eurobond when its due. If we have the capability to honour our dues , the Prez should not have brought up the issue of refinancing with the Turkish President. Turkey are grappling with double digit inflation – the decision to assist in this regard looks suspicious.
The lack of moral responsibility on both the lender and the borrower is evident in this case . Loans/Eurobonds are dished out to countries with no capacity now or in future to service these loans. And the borrower misrepresents their capabilities to service these loans .The monies obtained in most cases have been looted by connected party cadres.
The IMF have been forthright…
.. and refused to lend us money , because our books look like they have been cooked or are cooked. For all the problems they have caused in developing countries ,I commend them in this case.
The Finance minister does seem to know how deep the debt hole is and soon the kak will hit the fan.