Economics Association of Zambia President Lubinda Haabazoka says he fully supports government’s proposal to refinance the Eurobond using a Turkish private company.
Dr Haabazoka said what the Zambian government has proposed to refinance the Eurobond using private equity is 100% correct.
He said the Turkish company which has offered to pay the Eurobond is not a vulture fund.
“If it was a vulture fund, they could have bought our bonds on the capital markets (mind you we have no control on who buys our Eurobonds) then waited for us to default and then pounce on us. But they came in to help out,” Dr Haabazoka said.
Dr Haabazoka stayed that the terms on which refinancing is done are more favorable than the loan being refinanced.
Below is the full statement from Dr Haabazoka
I am very shocked that we are rising issues about loan refinancing when government has done it since independence.
When government issues treasury bills (which are short term notes sold at a discount of face value) some of the proceeds normally go to paying of government debt.
I spoke extensively about the negatives of Eurobonds when government announced plans to issue the first one but everyone called me an alarmist, an opposition carder or whatever.
What simply I wanted to advise then was that were were going to find ourselves in the situation we are in today.
If you have forgotten what I said about Eurobonds, please go to google and look up in the archives of the post newspaper. You will even find an estimate of how much money I calculated we needed to set aside per day to repay interest on Eurobonds.
But typical of us, you all brushed me aside.
When I mentioned that we needed to pay the principal amount at once, even Economics Professors called me to say stop lying to the masses! I kept to my story and we have all lived to see what I said!!!
But one thing I don’t want to be part of is crying over spilled beans! I always want to be part of the solution and not just cry about issues.
What government has proposed to refinance the Eurobond using private equity is 100% correct.
Imagine how much tax you need to pay to raise $3bn?
Imagine the damage to the economy if we defaulted on capital market debt (Eurobonds)
Some overzealous politicians even call for selling the Eurobond (which is actually refinancing) to Zambian citizens.
Do they understand the economic impact to the real sector of the economy if we withdrew $3bn from households at once?
Please if you don’t know economics, just sit aside and let experts deliberate.
No wonder we want to engage stakeholders to ensure that Economics Association of Zambia becomes statutory.
No people should masquerade as Economists and send false informational to the market.
So when the Zambian government gets equity from one company to repay the Eurobond, yes we still remain with the debt but the debt that we now acquire will be completely paid off with time.
With Eurobonds, the principal still remains.
The Turkish company is not a vulture fund.
If it was a vulture fund, they could have bought our bonds on the capital markets (mind you we have no control on who buys our Eurobonds) then waited for us to default and then pounce on us. But they came in to help out.
Mind you, experience has confirmed that terms on which refinancing is done are more favorable than the loan being refinanced.
My advise to government is that they entice the Turkish government to also join the refinancing so that the deal also has a public touch.
That way, you minimize misunderstandings during possible future debt restructuring.
So why did we start getting Eurobonds?
The idea of getting Eurobonds started under then Finance Minister Musokotwane during the MMD government.
Even the IMF and World Bank advised us to get Eurobonds!!!! ( that is why I no longer support an IMF package).
When we reached middle income status, donors pulled out.
They advised us to get a credit rating so that we could access funds on capital markets.
They said we are now mature enough to get that money.
They knew their citizens don’t have instruments to invest in.
They knew our bonds would give better interest than theirs because of the risk factor.
Imagine in some countries like Switzerland and Japan with negative lending rates?
If you get 5% on a note in the USA for a domestic bond then you are lucky.
Their plan is to ensure than when we fail to mobilize resources at once to repay the Eurobonds, so we go back and borrow more from them so that their citizens benefit.
This cycle can never end.
The USA debt is accumulating exactly the same way.
But they print dollars to repay the debt but we don’t have that luxury.
I hope you now see why I want home grown solutions.
So colleagues don’t join me into the politics of why why why!! Ours is to ensure we give sound economic policy direction.
“But they came in to help out,” Dr Haabazoka said.
Are you privy of the whole story? In exchange of what? There is nothing for something.
“Please if you don’t know economics, just sit aside and let experts deliberate”
This is the reason Zambia can’t move forward… there is no useless citizen, we all should work towards perfecting our economy from all sectors citizens come from, it is called debate. No country ever moves forward without debate and with pure economists in the driving seat!
“Ours is to ensure we give sound economic policy direction”
They will not be any economy if the money is being squandered without investing it properly with sensible returns! You can advise all you want and if they buy fire trucks, you advice is as good as the fire hydrant itself…
@Dr Chonya:
Spot on! You are the most sober person on these bloggs ever. Haabazoka always likes and goes for grabbing headlines. He jumps in support of anything including things he doesn’t even know.
The Govt told us that even the terms of refinancing have not been discussed and agreed. BUT Haabazoka in his usual show off manners jumps up and puts his head on the parapet to tell us that it is a good deal even without knowing full facts.
This kind of behaviour could be attempt to disguise his feelings of inadequacy because of his socialist Economics qualifications which aren’t entirely suitable for a Capitalist/Mixed economy like ours. Haabazoka needs to calm down and stop his know it all mentality.
Dr.Haabazoka, my brother, you could still make a point without necessarily sounding pompous or belittling other people. With such statements, people would think you are looking for a job in government.
@Haabazonda, the new Linda Kasonde
I have said this a thousand time and as an Investment Banker I can actually structure this whole thing for GRZ for free.
Also, if the Turks negate on their promise, I can get my friends at Goldman Sachs, New York or Deutsch Bank, Frankfurt to help.
Refinancing is the only viable option at the moment then as soon as that is done we move forward with a sinking fund. The Prof here has just reinforced what I have been calling for.
Margaret faka speedie … our time is now.
An investment banker who sees a US dollar loan of 30% as fair is not well-regarded in informed society. No investment banker who’s aware of Zambia’s current standing with rating agencies would even be willing to discuss re-financing Zambia’s Euro-bonds. There’s a market for Zambia’s debt and it is with vulture funds. Michael Milken, one-time junk bond king would have helped but he has long since quit the game.
No brand-name investment banker would even meet Maggie Mwanakatwe given our rating now. Not Deutcshebank, not Morgan Stanley, not Goldman Sachs, not JP Morgan. They would not even take her call. They do not deal in junk.
There are too many experts in Zambia in almost everything. What beats me is why are we not at least in the top 10 developed nations in the world?
Look at this mother fcker Haachizoka with his questionable Socialist Russian Economics Degrees making himself an idyot of the year!
Surely Haachizoka is getting drunk with that little post he got without competition from the half dead Economics Association of Zambia as their President! Surprisingly, Haachizoka can stand up declare his support when FULL terms are NOT even known and it is not yet clear if another lender could do it on more favourable terms.
Such opportunism by this idyot is clearly worrying – please we need economists with proper economics qualifications to put this mother fcker in place. This rogue communist trained economist likes grabbing the headlines in the media but he has gone a bit far this time. His socialist economics degree is as good as fake and too dangerous…
Very Objective Dr. Haabazoka. Let’s roll. Zambia needs to develop infrastructure in order to support investment and to sustain it. When the Cold War ended, investors rushed to the East bloc countries than to Africa because these countries had the infrastructure in place already. This is very important. We must sustain our achievements.
This guy is now becoming very desperate for a job in the PF government. Dr. Habazoka, don’t think that you’re the most educated economist in Zambia. I hear people like you with Russian economics degrees can’t even get a job in the European Union. You seem to have an unfounded superiority complex when talking about economics professors who talked to you. People will still talk about the economy even if EAZ becomes statutory because you don’t need an economics degree to spot wrong government decisions. We pay taxes that’s why we talk against wrong government fiscal policies. If the government had listened early when people were complaining about excessive borrowing and stealing, we wouldn’t be in this situation. Sober up and get civilized.
No need to kill the messenger. The African and HH culture (Pull HIM Down – PHD syndrome).
Except for the part where he seem to be bragging and sounding like a Mr know it all Dr h’zokas presents himself as a well balanced academic. Pretty much likable
@Dr Chonya:
Spot on! Haabazoka always likes and goes for grabbing headlines. He jumps in support of anything including things he doesn’t even know.
The Govt told us that even the terms of refinancing have not been discussed and agreed. BUT Haabazoka in his usual show off manners jumps up and puts his head on the parapet to tell us that it is a good deal even without knowing full facts.
This kind of behaviour could be an attempt to disguise his feelings of inadequacy because of his socialist Economics qualifications which aren’t entirely suitable for a Capitalist/Mixed economy like ours. Haabazoka needs to calm down and stop his know it all mentality.
The decision to refinance is correct but not with the Turkish firm as the Country Risk “Turkey is a Cost to Zambia ” Mind you you might be NATO but consequences in capital flows that could unwind negatively for Zambia reflecting the Sovereign Risk Zambia reflecting the Political Risks in turkey pronounced Moreover the Cost of Capital and efficiency in trading the refinancing in Turkey solutions is costly to Zambia
We know the assumed cost of refinancing for typical Firm or Bank in Turkey Its a burden for the country better in efficient markets where spreads are narrow
No Turkish refinancing DU is right
We are getting into real trouble with such fake Russian trained economists like Haabazoka. The Professors who he claims to have criticised him were simply making things clear for him. Zambia does not have a planned economy like Russia or Socialist countries where he got his qualifications from. Ours is a Mixed/Capitalist economy which he cannot understand how it functions. His plans to introduce a legislated communist style economics model which ignores other key players like Bankers, Accountants, Engineers leaving the field for him alone to bulldoze is another disaster in the making.
Haabazoka is crazy – his argument that Zambia doesn’t need the IMF bail out remains his fantasy alone and that is why Mutati and now Mwanakatwe have ignored his crazy socialist ideas
In his article, this crazy man Haabazoka claims that “Economics Professors called me to say stop lying to the masses.” This is actually true just as he is lying to us again now.
The truth is a Loan from the IMF which he does not want want us to get is a far much cheaper than a loan Turkish loan which will be a full market interest. This is because the cost of borrowing (interest) on the IMF loan will be concessionary likely between 0 – 0.5% whereas the interest on the Turkish loan will at Market value and will always be higher than IMF loan anyway.
All other properly qualified economists and Accountants like Pof Musokotwane, Chibamba Kanyama, Beyani, Mutati and Mwanakatwe are for the IMF loan and Haabazoka is the only one opposed – Shame!
Monetary Policy Committee Announcement and Minutes
2 August 2018
At its meeting ending on 1 August 2018, the MPC voted unanimously to increase Bank Rate by 0.25 percentage points, to 0.75%.
The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.
The Dr is wrong We need to refinance and create space to reserve (Sovereign Wealth Fund) or other to liquidate the refinanced Looking at the performance of UK bonds Turkish refinancing can not outperform developed markets or similarly others
and then its like the Bonds were not insured but even then if the firm from turkey is just a broker not a dealer or “underwriter” Then the costs are even more hidden and above market because of additional brokerage costs for non technical people simply the “markup cost on the refinancing”” The lion bank MD is wrong also in his commentary
Dr. Haabazoka is being attacked by the LT UPND mafia today because he is supporting government. When he disagrees with the president and the PF, he is an angel. Grow up, PF and UPND youths are actually working together.
UPND Mafia. Right!
And this pvt company could easily sell the bond to “vultures” if they offered it a better deal. And that could easily become a vulture fund. Habazooka Tell your pf govt to plan on how to pay their debts before they borrow? And this habazoka guy, i always thought there was something amiss about his analysis. He doesnt seem to know whatever aspects of economics he talks about.
I like the bold character of the Dr but He should have thought closer also the implication of growth prospects for Zambia both before and after whatever refinancing methods For this tax refinancing the result effect is negative growth prospects that makes it difficult to close off the entire portfolio of securities at maturity in that refinancing
Then we support economics for Investments decision making and all financial and economically sound minds are welcome There could be not correct view but consensus holds But then we know Presidential economic and Financial advisers with track records in world bank imf China Us africa and middle from globally renowned…
schools like Professor of Applied Economics at Johns Hopkins University
To reach further heights requires humility and soundness and reasonableness of research factually rightly expressed especially when analysis rates
Its costly and does not fit in the economics of the country say t0 2020 or 2030
Point of correction, Mr Chibamba Kanyama hold a Degree with a Major in Mass Communication and a Minor in Economics.
Look at the US and Global Geopolitics against turkey weaker economic prospects That does not support refinancing at reduced risks and costs for longterm