Economist Chibamba Kanyama has attributed the sharp depreciation of the Kwacha to the importation of crude oil.
The Kwacha has cont9nued to lose value against key convertibles trading at K20 to 1 US dollar as at Monday, September 7th 2020.
Mr Kanyama said the pressure on Kwacha could be due to the restocking of Indeni with crude oil which is going on at the moment.
He further attributed the depreciation of the local currency to the importation of agriculture inputs ahead of the agricultural season.
Mr. Kanyama also observed that the Kwacha’s rapid depreciation could be that investors are waiting for policy direction following events at the Bank of Zambia.
Meanwhile, Reuters reports that Zambia has kicked off the process of registering its Eurobond creditors, bringing the country another step closer to tackling its hefty debt burden.
One of the world’s largest copper producers, Zambia owes money to four main types of the creditor.
It has $3 billion of Eurobonds outstanding and owes $2 billion to commercial banks, $2 billion to the International Monetary Fund and World Bank and another $3 billion to China.
Zambia’s Finance Ministry said in an authorization letter that its financial adviser Lazard had appointed Morrow Sodali to gather information on the holders of its three outstanding Eurobonds and “facilitate communications”.
In May, Zambia’s government-appointed debt specialists Lazard to advise on how to overhauls its foreign-currency debt.
Meanwhile, its three outstanding dollar-denominated bonds have recorded sharp gains in recent days. 2022, 2024, and 2027 issues ZM082877959=, ZM105638671=, ZM126708157= all traded around 55 cents in the dollar, having gained around 3 cents since the start of the month and up from levels below 30 cents in late March and early April, during the height of the coronavirus crisis.
“Sub-Saharan bonds in general have recovered on massive G7 central bank liquidity injections, the pick-up in commodity prices, a stronger performance than many so-called ‘developed country’ peers in dealing with Covid-19, and solid emergency macro policies in countries such as Angola and Ghana,” said Simon Quijano-Evans, chief economist at Gemcorp Capital LLP.
Furthermore, the bonds had benefited from peers across the region making progress in debt forbearance talks with China and the Paris Club of creditor nations. Paris Club creditors agreed in late August to give Angola debt service relief until the end of 2020.
In June, 10 of Zambia’s international bondholders said they had formed a creditor group to facilitate debt talks with the government.
“Looking ahead, all eyes will now be on what plans Zambia may have with regard to liability management, coupled with a much-needed IMF loan program,” said Quijano-Evans.