Bloomberg news reports that Zambia’s second Eurobond will prove costlier than its debut issue in 2012 after the budget deficit ballooned in the nation, which lost its spot as Africa’s biggest copper producer last year.
Spending reforms by President Michael Sata, whose 2011 election victory ended two decades of rule by a single party, were met by a Fitch Ratings downgrade last year, pushing it deeper into junk and making it the continent’s worst bond performance. Zambia’s dollar security due in September 2012 lost 9.7% in the past 12 months, compared with a 17% return in African sovereign bonds, according to JPMorgan Chase.
Mr Sata, 76, has focused on developing roads and railways in the $21bn economy and sought to harmonise civil-servant salaries that drove the budget deficit to 8.5% of gross domestic product (GDP) last year. Zambia, which mined an estimated 830,000 tonnes, was passed by the Democratic Republic of Congo as Africa’s top copper producer, says the US Geological Survey.
“The market’s perception of the government’s ability to manage public funds has worsened,” Yvette Babb, a fixed-income and currency strategist at Standard Bank in Johannesburg, said. “The credibility of Zambia’s fiscal policy has suffered as a result of the overrun in the budget deficit in 2013 as well as inconsistent statements about the magnitude.”
Zambia’s fiscal shortfall last year was wider than a 4.3% gap initially forecast by the Finance Ministry when it set budget targets in October 2012. A deficit of 6.6% is projected for this year.
The landlocked nation bordering eight countries said in October it may issue $1bn of Eurobonds, hiring Deutsche Bank and Barclays in January to lead the sale. Felix Nkulukusa, permanent secretary at the Finance Ministry, declined to comment on the plans.
Yields on Zambia’s $750m of debt sold in September 2012, which began trading at 5.16%, climbed to 7.97% by 11.52am in Lusaka. The Finance Ministry may have to pay 7.5% to 8.2%, depending on the amount, said Irmgard Erasmus, a fixed-income analyst with NKC Independent Economists in Paarl.
“We see considerable downside risk to Zambia’s domestic macroeconomic environment, which will likely result in a considerable premium at the upcoming issuance,” she said. “We consider the deterioration in the fiscal metrics” and dependence on a single commodity to be red flags, Ms Erasmus said.
Zambia depends on copper for about 70% of export earnings. Concern that growth is slowing in China weighed on the price of the metal, used in plumbing and electrical wiring. Copper for delivery in three months fell 17% over the past year to $6,505/tonne in London on Thursday.
Copper’s decline was among factors cited by the Bank of Zambia on March 7, when it said “panic” had gripped the country’s foreign-currency market. The kwacha weakened 1.3% to 6.01 per dollar, bringing this year’s drop to 7.7%. It’s the worst among 24 African currencies this year tracked by Bloomberg. The central bank raised its benchmark rate by 50 basis points to a record 10.25% on February 28.
Infrastructure investments and expansion in mining, including projects developed by Vancouver-based First Quantum Minerals, are set to boost growth to 6.5% of GDP this year, faster than the sub-Saharan African average of 6%, according to the International Monetary Fund’s October World Economic Outlook. Agricultural output may climb, allowing maize exports, vice-president Guy Scott said. The economy’s growth should encourage investors to buy Zambia’s bond, said Charles Laurie, head of Africa at UK-based risk analysis company Maplecroft.
[pullquote]The slump in the price of copper, which accounts for about 70 percent of Zambia’s export earnings, has seen the kwacha weaken 8.3 percent this year, the worst performer among the African currencies tracked by Bloomberg.[/pullquote]
“Plans for the issuance of a second Eurobond are sound,” he said. “Sound macroeconomic management, opportunities for nonmining investment and a young population signal growth opportunities.”
As Zambia heads to an election in 2016, Mr Sata, who ran three times before winning office, faces a tough fight to stay in power, said Clare Allenson, an analyst with Eurasia Group in Washington DC.
That poses extra risks to the state’s finances and may weigh on the next Eurobond issuance, she said.
Meanwhile,Zambia’s copper mines would be threatened should the price of the metal extend its decline to $5,000 a metric ton, according to the country’s mines minister, Christopher Yaluma.
Copper has dropped 13 percent this year to the lowest levels since 2010. The metal, which last traded below $5,000 a ton in July 2009, was down 1.4 percent to $6,415 as of 12:36 p.m. on the London Metals Exchange.
“When it starts getting to $5,000 and below,” that would threaten mines in Zambia, Yaluma told reporters on the sidelines of a mining conference in Lusaka, the southern African nation’s capital. “I don’t think this is going to carry on; it will still bounce back.”
The slump in the price of copper, which accounts for about 70 percent of Zambia’s export earnings, has seen the kwacha weaken 8.3 percent this year, the worst performer among the African currencies tracked by Bloomberg.
Yaluma expects Zambia to regain its position as Africa’s top producer of the metal, which it lost last year to the Democratic Republic of Congo, when new mining projects start production.
“When we see something like that it invigorates us to do much better,” Yaluma said. “It just tells Zambians to get your acts together.”
Ubomba mwibala alya mwi bala! that is our Motto!
“The kwacha weakened 1.3% to 6.01 per dollar, bringing this year’s drop to 7.7%. It’s the worst among 24 African currencies this year tracked by Bloomberg”.
yes ubomba mwibala syndrome!! i guess someone should be encouraged to eat even the seeds and chop down all trees
putting same 1diots in power and expecting different results. sometimes I tend to believe that majority zambians are 1diots. how on earth would a sane person vote for sata and expect miracles on the economy? its a fallacy. funny enough these stupid voters are the ones who are hit harder by sata-nomics of this country
Miles Sampa negotiated this thing, what did you expect?
We have told people of this country from the word go, PF has no economic plan and will leave this country worse off in 2016. All this party knows is how to steal and spend on unplanned projects. Both strategies, stealing and unplanned spending, are not helpful to this economy and the poor of this country who needs real good jobs and not the chibombebombe jobs created by Chella on FB.
Uko the chickens have finally come home to roost.
These chimbwis no plan s borrowing will now not come cheap as their credit rating is soon to be down graded to C or C-.
well well well,,,, so mr president whats your facebook response to the bloomberg damning news reports??
ba Chikwanda and ba Sata have failed the zed economy…and ba Yaluma busy assuring us that our mining ll rise once again…guess what? some of us wnt agriculture and manufacturing to overtake the mining sector!!…we cn do much better than K6.01 per dollar.
USA makes people to think foolishly. They are the one on the easing programe and then put blem on our leaders. They are just trying our intelligence.
IMF Says
INFRASTRUCTURE INVESTMENTS AND EXPANSION IN MINING, INCLUDING PROJECTS WHICH ARE BEING DEVELOPED BY THE MINING HOUSES SUCH FIRST QUANTUM MINERALS, ARE SET TO BOOST GROWTH TO 6.5% OF GDP THIS YEAR, FASTER THAN THE SUB-SAHARAN AFRICAN AVERAGE OF 6%, ACCORDING TO THE INTERNATIONAL MONETARY FUND’S OCTOBER WORLD ECONOMIC OUTLOOK.
CHARLES LAURIE, HEAD OF AFRICA AT UK-BASED RISK ANALYSIS COMPANY MAPLECROFT SAID THE ECONOMY’S GROWTH SHOULD ENCOURAGE INVESTORS TO BUY ZAMBIA’S BOND. HE SAID THAT, “PLANS FOR THE ISSUANCE OF A SECOND EUROBOND ARE SOUND.” HE ADDED THAT “SOUND MACROECONOMIC MANAGEMENT, OPPORTUNITIES FOR NON-MINING INVESTMENT AND A YOUNG POPULATION ARE GOOD SIGNALS FOR GROWTH OPPORTUNITIES FOR THE COUNTRY.”
WITHOUT INFRASTRUCTURE DEVELOPMENT, THERE WOULD BE NO…
@LUAPULA PREMIER, please do not try and defend the INDEFENSIBLE!
Your comments are pure BULSHlT!
F*** O**
@Luapula
Ubu nangwa mwamusango oyu tabufwayikwa iyo munochalo cha Zambia, waunfwa iwe Luapula.
This would have been a good contribution if it was in lowercase.
Surely,what did we expect? We can’t expect the same folks who couldn’t oversee a successful airline,a succesful ZR and a successful zamtel to manage a budget prudently.If they knew how to manage things they’d be running their own successful firms instead of depending on public coffers.
Ndobo that’s the good thing of ruling using facebook, you can ignore, and not respond, you can issue condolences without showing up, post pictures of
yourself in meetings,and swearing in ceremonies, and just step out when there
is an election campaign.
kkekekekekekekekekekeke! nice one and also considering that faceboock is addictive
this Doomberg news, all of them are western alarmists who are threatened by the formidable chinese presence on the african continent. zambia is doing well and we dont give a rats ass about your stupid dollar. we buy, sell and consume most of what we produce locally. our only major export is copper and china is our buyer ba kolwe. you neo-colonialists can shove your Fitch feaces ratings up your asses ba shi!it
IGNORANT IDlOT!
Go join your stoneage fossil relatives where you belong!
What???? Zambia produces very little, it is totally reliant upon importing goods…. which are usually purchased on the open market in US Dollars!
Whoever has put you on the payroll for useless postings is equally dull.
It is not certain.
This is stale news. It was on ZWD a week ago. Cut and paste news.
Am sure even the pf zealots are beginning to doubt. We are running the risk of slowly accepting our current situation, By lowering our standards and expectations. If the kwacha keeps going down, will have a mountain of debt, and we r going to eat infrastructure.
The problem with Wnzelu, Matipa, 142, Timbuktu pride is that whatever the issues that is brought on the media, it is all about HH. They are a slave to HH. HH will never save your a.s.s.e.ss. These alarmists publishing are usually alarmists and that is how they put bread and butter for their families. How economic advises have IMF and world bank advised the third world countries and things haven’t worked. The fact is that the economy of Zambia is increasing.
@ BBC
Me slave of HH?
You are a REAL PILLOCK.
Unlike you, I was born FREE.
Unlike you, I am living as a FREE man.
Unlike you, I will die FREE.
Unlike you, I am not a slave to others charity.
Unlike you, I can go whenever I want to go.
Unlike you, I do not have allegiance to no man, no woman and no party.
My allegiance is to the God and my family.
I think FREELY and talk FREELY because, unlike you, I do not need crumbs from top table to make ends meet.
I am free to criticize and call “spade” “spade” because for me, unlike for you, tribe, beliefs, gender, race and social status do not means nothing. I am interested in FACTS.
No embroidery, no fiction, just plain unadulterated FACTS.
Never argue with a fool.Can write coherent english,i doubt their grasp of economics is any better.
BBC show me objective and analytical signs that Zambias economy is growing. If you cannot I will conclude that you are one of those people who enjoy annoying others by creating useless arguments or you are an ignorant illeducated blind cadre.
We are in trouble.
THE FACT IS THIS COUNTRY IS DEVELOPING…
ALL ECONOMIC INDICATORS SHOW THAT THE ECONOMY IS ON THE UPWARD MOVE. PLEASE ASK THE PASTOR OR THE FATHER OR THE TRIBAL MASTER OR ANYONE ELSE TO TELL THE NATION HOW THEY WILL DEVELOP OUR COUNTRY WITHOUT GOING THROUGH INFRASTRUCTURE DEVELOPMENT.
PLEASE STOP DREAMING.
Ba kawalala group of Luapula Premier and Kudos have looted the treasury like chiluba chif thif did. wat a group that wont work but all the time kabwalala self centred. Fearing uprght rule they tribal vote for a man who is destroyng the economy mugabe style throgh kaloba. in 2011 they said twalavotela ichipuba chesu……
I wish that it was a dream. Unfortunately is a bleak reality. Wake up Jerk, open your eyes, look at the reality. Facts are there in front of you.
Luapula is George Chellah. He sees nothing beyong statehouse.
I have learnt one thing today, never trust a guy who doesnt know where the caps lock is.
Too much jerking in the toilet is bad
What’s caps lock in Bemba?
Well we told you so…I remember during the elections people were crying about wanting change. Now we have the change..economic mismanagement at a very grand scale. Honestly one pound is now buying you 10K. It shows how far the economy has fallen at the hands of these socialists. Socialism never works will never work wake up and smell the coffee. But the thing that worries me the most is that the opposition are very weak. They need to get up and tell us what they are going to do instead of insulting each other everyday. Our country is headed to the dustbins and we have no one else to blame but ourselves whether we voted for these animals or not.
How do you expect dull leaders like Sata who don’t know that USA was not a colonial power and don’t understand how he hasn’t made it rich after working for 30yrs in GRZ to know how to run a budget or an economy?
Ujinga ni mwingi kwetu Zambia.
I wonder what Fossil Chikwanda and the empty tins in State House are going to make of this article….dont be surprised if they say the Bloomberg don’t know what they talking about as they are not based in Zambia.
Cut and paste “journalism”. I doubt most people understand what is being written about
Yes, but people understand difference of what you can buy with 100,000 then and 1,000 now. Stop looking at bare number, look at purchasing power. Even RATSA has increased “donation” minimum.
Once bailed out what stops you going for another shot, you had debt cancellation now a decade later going for more debt. The PF Govn’t suffers from a psychological problem. Pray for China not to default otherwise any further downside on copper price will have serious repercussions on the budget and the kwacha.
Mzambia wa zamani, USA was a colonial master. ( japan, philipines even puerto rico)
And? It was also a colony. So what? Lucky for them, they do not have American equivalent of Chikwanda, Kabimba, Kambwili ……………….
Guys we are going down the path of economic melt down like mobutu’s zaire and mugabe’s zimbabwe.
You cannot borrow your way into development for debt is a double edged sword.
How I wish Sata and his whole cabinet where on that plane from Malaysia that has disappeared!
Very good idea! If this M0R0N in State house does not start doing what his employers, the taxpaying people of Zambia, are paying him to do, we will find him a seat on one!
@ Mzambia WA Zamani,unatamka ‘Ujinga ni mwingi kwetu Zambia.’ Mujinga niwewe peke yako, kwani hujui tofauti iliopo katika maendeleo ya sasa nagiza iliyo enea nchini siku Za MMD. Sata is a practical leader. The whole country is currently in a frenzy of development. Eurobond is prudently being utilized.
Muzi nyola muchitundu chamene tunvela ako! I also want to understand and participate!
@ Mzambia WA Zamani,unatamka ‘Ujinga ni mwingi kwetu Zambia.’ Mujinga niwewe peke yako, kwani hujui tofauti iliopo katika maendeleo ya sasa nagiza iliyo enea nchini siku Za MMD. Sata is a practical leader. The whole country is currently in a frenzy of development. Eurobond is prudently being utilized. Oh..
Wanzelu lives in UK and possibly does not follow the markets pound equivalent to 1.65 now it’s 1.53 therefore it shows that since the USA stop easy quantitative programme the dollar is going up. So zambia has to face what other countries are facing. Infrastructure is the way forward. You can keep dollars in foreign banks and those dollars will used in that country to develop when Zambia remains behind . Talk without solutions means bush products and clueless
And like that, UK export will expand. Great. By the way, apart of copper and few gems, what are you going to export? Promissory note? I.O.U.? Debt coupons?
What kind of infrastructure are you talking about? And how is govt going to utilize that infrastructure to generate revenue?
Speechless!
My understanding of the thinking of some of these Zambians with mouth diarrhoea is that we would rather have potholes in Cairo road for the sake of the kwacha strength. Can tabulate the countries whose exchange rate has remained stable since the US decided to mop up their currency. I now buy my dollar @ 165 from 140 despite oil availability
Ati you cannot eat infrastructure development. Indeed cow fart is more potent that cannabis.
You’ll still have potholes (and bigger ones too) if your budget deficit keeps going like it is.
Late LPM said it Zambians haveshort memories. I have indeed believed that we have short memories going by the blogging of Chabwera my tumbuka brother, Luapula premier etal. Back in the 70s and 80s those were the thoughts we expressed about the economy, once again we have a repeat and some people are still denying the writing on the wall. WAKE UP!
you clowns that support this kaponya group called of are worse than pf itself because you hate this country more than this group of thugs, and clearly you dont have a family you support or even a business, so its easy for you to support this rubbish blindly, but the good news is it the very poor *****s that will feel the pinch of what dull pf is doing
I wonder wht kind of infrastructure development these guys are talking about. You don’t need a lots of calculations to understand that the PF government has borrowed a lot as compared to what has been invested. You don’t need a loan to put a tar mark which has no outlet. Where is the money that govmnt is generating goes? Don’t be mayopic and praise any how. These loans are not for free.
The same argument was used in the 70s and 80s that borrowing was for development.
Debt for a poor nation is necessary and beneficial if got in sustainable volumes and invested effectively on a reasoned public-good return on investment.
The creation of numerous districts and grandiose projects are now overwheming Zambia through huge debts (local and foreign).
Is it not stupid that Zambia exports raw copper to China and buys copper pipes and cables from China. Stupid indeed
While you call it stupid why haven’t we Zambians found out how to make the copper pipes and cables. By Zambians that includes you and me aren’t we just plain stupid?
Good morning
Firstly, Zambians should not be so much worked up with these predictions from Bloomberg and co. We know their make-up and colonial orientation.
Second, there must be a limited lifespan for borrowing – it is Ok to borrow with serious intentions but the ultimate aim must be economic independence. If used wisely, the borrowed funds can help the country to wean itself from western institutions and donor aid.
Africa has all the resources it takes to feed itself and the world. We need to move away from the mindset of receiving to the mindset of innovating (producing). This we can only do if we get enough capital to put the necessary infrastructure in place.
`if used wisely` in this case there is no wisdom, the money is used for by-elections, to stabilase the kwacha exchange value, to pay the huge cabinet and to setup tribunals whose findings will be rejected
You know Chale I like the way you are blogging these days. to me you are sounding very objective. Now to your point. I agree with you on the time frame for borrowing. The best empowerment is education and with it explicit knowledge. With this a people will know how to generate wealth. Back when I was taught social studies in grade six we learnt about the industrial revolution and what characterised it. This is what we need in Zambia. We need to study the dynamics of the revolution and see how we can translate it into the Zambian mordern context.
Any word of wisdom from State House?
You mean Sunday joke?
“Sunday joke”? Certainly not. This is serious. Must they not call on Ndambisa Moyo to the rescue, I wonder!
Rather, I mean Sunday confession, if at all Mr. Sata is the devout Catholic he purports to be. I reckon Its pride that is the core of our economic demise. Is it rather not too soon for Zambia’s economy to sink back into those deep waters from which it had to be pulled-out not too long ago? How may we explain this to our posterity?
~28,
I used to think you had an ounce of intelligence in you but I was wrong.Look at the Zambian budget before you blog.65% of the budget goes to GRZ salaries and allowances.Out of that 35% goes to infrastructure development(roads, railways,hospitals ,fresh water etc).In your little brain, would you support borrowing for consumption?How can you have 5 PS in one ministry? 4 Deputy Ministers in one Ministry and you think that is development.When in opposition, Sata talked of small GRZ but look at him now.He can not have a press conference because he has no plan for Zambia.His aim was to get into plot one and screw the country.He brought in all recycled, tired old men back from Unip and you expect things to improve.The 1st thing he did was to start his retirement home.Does that make sense?
Countrymen, seriously what did we vote for? With all that is happening in the country, there is no address by the president…..the kwacha, constitution issue etc…? Please let us not accept this mediocrity. How can we have a president who cant talk to his people?? We surely made a mistake in 2011, SATA needs to go, the man has failed and does not know what he is doing///