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Has Zambia’s failure to secure IMF aid deal rattled investors?

LUSAKA Zambia (Xinhua) -- Delays by the Zambian government to secure an aid package from the International Monetary Fund (IMF) has sent shivers among international investors who have now developed a "wait and see" attitude, resulting in the yields for the country’s Eurobonds rising, analysts have said.

Zambia’s yields on its Eurobonds have risen to about 10 percent, making the country’ debt second to Mozambique globally.

Until recently, Zambia’s yields, among the highest of any sovereign in the Eurobond market, were helping attract investors.

Analysts are now skeptical as to whether Zambia will agree on a bailout package with the IMF that has expressed concern on the country’s debt situation, which it has described as being at risk of debt distress.

There have also been speculations about the country’s true debt situation, with the government insisting that its debt currently stands at 9.1 billion U.S. dollars, according to revised figures, while other sources have put the debt much higher what is portrayed by the government.

"This is not sitting well with investors because Mozambique is now known to have defaulted on its debt and they (investors) fear Zambia may be next. The consequence is that non-resident investors seem to be withdrawing or cashing out," economist Chibamba Kanyama said.

The economist stated that the failure by the government to issue a comprehensive statement on the current engagement with the IMF was forcing investors to trade on secondary information they were getting from other sources.

"There is a definite cure to this so that we avoid a free fall on yields because any further rise makes it impossible to service the Eurobond.

"Government can enhance its communication, engage the market and inform everyone about current economic stabilization program," he added.

According to him, all is not lost for Zambia as the country has systems strong enough to inspire confidence but added that this should be done as a matter of urgency.

All the investors want is proactive engagement about market developments, he said, adding that the government should prove to investors that it was concerned about negative market perceptions and was taking action to stabilize the situation.

His views have been supported by the Africa Confidential, a renowned specialist publication on Africa.

In its latest analysis of Zambia dated June 1, the publication notes that the current situation was a reflection that the Zambia government has failed to yield confidence before the IMF following the continued borrowing for infrastructure projects.

According to the publication, last year, investors still believed there was a chance of an IMF financial bailout but that the continued borrowing may have scotched any chances of a program.

"Experts say an IMF program and a loan to support balance of payment are essential. But the IMF wants Zambia to show that it will stop borrowing and get debt on a stable path," it said.

According to the publication, while Zambia’s debt has continued to rise, its international reserves have fallen to just 1.8 billion dollars, resulting in the local currency begging to totter as the central bank has stopped defending the currency’s value.

But the government has insisted that there is no need to hide any information, adding that it has been transparent in both in its dealing with the IMF and on the debt situation.

Its finance ministry said in a statement that it was ready to engage and provide fiscal and debt information with all stakeholders as it has nothing to hide.

The government, it said, has not backtracked on its engagement with the IMF and was committed to finalizing the deal, adding that a full debt sustainability analysis was conducted and the results will be shared with the IMF.

Zambia has been seeking for an IMF aid package of 1.3 billion dollars since June 2016 but talks have been on and off.


Zambia cancels 500 mln USD loan guarantee for emergency electricity imports

LUSAKA Zambia (Xinhua) -- The Zambian government on Wednesday announced the cancelation of a 500 million U.S. dollars sovereign loan guarantee it secured for the country’s power utility for emergency electricity supply at the height of acute electricity shortages.

Zambian President Edgar Lungu signed the sovereign loan guarantee on September 9, 2016 from a local firm, Stag African Investments Limited after he won re-election and before he appointed a new cabinet on behalf of state-run power utility, Zesco Limited.

But Secretary to the Treasury Fredson Yamba said Finance Minister Margaret Mwanakatwe recalled and cancelled the sovereign guarantee loan on April 24, 2018 issued in favor of Stag African Investments Limited.

"Since the issuance of the sovereign guarantee, all the conditions were fully met by Zesco but no disbursements were made by Stag African Investments over a prolonged period and consequently, the Ministry of Finance made recourse to other financing options in support of Zesco’s need for the critical electricity power imports," he said in a statement.

The official further said due to significant amount of the loan, the term of the loan agreement was that it required to be secured by a sovereign guarantee.

EU pledges to continue supporting Zambia in
strengthening public finance management

LUSAKA Zambia (Xinhua) -- The European Union (EU) on Wednesday pledged to continue supporting Zambia in strengthening its public finance management in order to improve accountability and utilization of public resources.

Gianluca Azzoni, Head of Cooperation at EU delegation to Zambia, said the organization was delighted to have contributed to the strengthening of Zambia’s public finance management through training of public officers under its capacity building support to the Ministry of Finance.

The EU, he said, was hopeful that the finance ministry will uphold reforms in public finance management as it was cardinal in ensuring prudent utilization of resources.

"We are confident that the Ministry of Finance is fully committed to the reforms and the activities that have been supported under the program in order to ensure the sustainability of the results achieved," he said at the completion of the first part of the capacity development program.

The EU provided 1 million Euros in the first part of the project which ran from 2015 to March this year and saw the training of 75 public workers dealing with public finance.

The capacity development program was one segment of a broader European Development Fund program for Zambia’s public finance management, accountability and statistics.

Fredson Yamba, the Secretary to the Treasury, hoped that the EU will consider further support to strengthen the country’s public finance management.

Zambia reviews farmer input support program after challenges

LUSAKA Zambia (Xinhua) -- The Zambian government on Friday said it has reviewed a program of providing subsidized farming inputs to smallholder farmers after a chaotic experience in the last two farming seasons.

The provision of farming inputs to smallholder farmers under the electronic voucher system (E-voucher) faced chaos in the 2017/2018 farming season as well as the previous season, resulting in late delivery of the inputs to farmers.

The E-voucher system, which requires farmers to use electronic cards to access farm inputs directly from agro-dealers, was introduced during the 2016/2017 season to replace the Farmer Input Support Program (FISP) introduced in 2002.

Minister of Agriculture Michael Katambo said the government has decided to make changes to the system, with about 40 percent of farmers on the program reverting back to the conventional method of distribution of the inputs during the 2018/2019 season.

He told reporters during a press briefing that some farmers will be reverted back to the conventional method of distribution of the farming inputs until challenges experienced in the implementation of the E-voucher system in last farming season are addressed.

The move, he said, was also meant to avoid putting the country’s household food security at risk.

Zambia’s annual inflation increases to 7.8 percent in May

LUSAKA Zambia (Xinhua) -- Zambia’s year-on-year inflation increased to 7.8 percent in May from 7.4 percent recorded in the previous month, its statistics agency said on Thursday.

"This means that on average prices of goods and services increased by 7.8 percent between May 2017 and May 2018," Goodson Sinyenga, acting director of the Central Statistical Office (CSO) told reporters during a press briefing.

He attributed the increase in the annual inflation to price movements in food and transport.

According to figures, the year-on-year annual food inflation rate was recorded at 6.9 percent compared to 6.5 percent the previous month, indicating an increase of 0.4 percentage points while the year-on-year annual non-food inflation rate for May was record at 8.9 percent from 8.4 percent recorded last month.

The country also recorded an increase in the month-on-month inflation to 0.6 percent in May from 0.4 percent in April, he added.


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