Zambia looks to IMF
Zambia seeks an IMF deal of as much as US$1.6 billion this month, according to its finance minister. The copper producer is in no hurry to issue a Eurobond.
Zambia plans to reach an aid deal for as much as US$1.6 billion with the International Monetary Fund (IMF) by the end of April, finance minister Felix Mutati said. Bond yields fell.
“At the moment we know that we can get up to US$1.6 billion, if you ask me, I'd go for the maximum,” he said in an interview on Monday. “Hopefully the programme can be presented to the board sometime end of June, beginning of July.”
The country has been talking about getting IMF aid since 2014, but resisted after two presidential elections since then made the required reforms politically unattractive. The country's fiscal deficit has risen, foreign-exchange reserves have declined, and economic growth is near the lowest since 1998, spurring the need for a programme with the fund.
Zambia's debt has also been climbing, putting pressure on the treasury. External debt has increased to US$6.9 billion, said Mutati, who President Edgar Lungu appointed finance minister in September. That's more than double the level in 2012. Total government debt is about US$10 billion, which is “pretty high,” he said.
Fiscal pressure
“Although this development is concerning, we do not see the latest incident as delaying IMF discussions,” Irmgard Erasmus, an economist at South Africa-based NKC African Economics, said in an emailed response to questions.
“Our baseline view is still that Zambia will agree to a programme of around US$1.3 billion as pressure on the fiscal position and balance of payments remains elevated.”
The cabinet agreed that the government conclude negotiations with the IMF for a programme, information minister Kampamba Mulenga said last week. It considers a package as “necessary” for Zambia's economic recovery, she said.
The government has sold US$3 billion in Eurobonds, the most recent being US$1.25 billion in 2015. It is “not in a hurry” to issue another, and won't do so this year, said Mutati.
Yields on the country's three dollar bonds fell, with the rate on the US$1 billion of debt due in April 2024 declining 14 basis points, the most since 16 March, to 7.92% by 17:45 in Lusaka on Tuesday. The yield on the bond [that matures in 2022] dropped 13 basis points.
Zambia still needs to clarify to the Washington-based lender how it will pay off about US$1.8 billion the government owes in arrears, Mutati said in his office. He spoke before flying to the U.S. to attend the IMF and World Bank Spring Meetings that begin today.
“At the moment we know that we can get up to US$1.6 billion, if you ask me, I'd go for the maximum,” he said in an interview on Monday. “Hopefully the programme can be presented to the board sometime end of June, beginning of July.”
The country has been talking about getting IMF aid since 2014, but resisted after two presidential elections since then made the required reforms politically unattractive. The country's fiscal deficit has risen, foreign-exchange reserves have declined, and economic growth is near the lowest since 1998, spurring the need for a programme with the fund.
Zambia's debt has also been climbing, putting pressure on the treasury. External debt has increased to US$6.9 billion, said Mutati, who President Edgar Lungu appointed finance minister in September. That's more than double the level in 2012. Total government debt is about US$10 billion, which is “pretty high,” he said.
Fiscal pressure
“Although this development is concerning, we do not see the latest incident as delaying IMF discussions,” Irmgard Erasmus, an economist at South Africa-based NKC African Economics, said in an emailed response to questions.
“Our baseline view is still that Zambia will agree to a programme of around US$1.3 billion as pressure on the fiscal position and balance of payments remains elevated.”
The cabinet agreed that the government conclude negotiations with the IMF for a programme, information minister Kampamba Mulenga said last week. It considers a package as “necessary” for Zambia's economic recovery, she said.
The government has sold US$3 billion in Eurobonds, the most recent being US$1.25 billion in 2015. It is “not in a hurry” to issue another, and won't do so this year, said Mutati.
Yields on the country's three dollar bonds fell, with the rate on the US$1 billion of debt due in April 2024 declining 14 basis points, the most since 16 March, to 7.92% by 17:45 in Lusaka on Tuesday. The yield on the bond [that matures in 2022] dropped 13 basis points.
Zambia still needs to clarify to the Washington-based lender how it will pay off about US$1.8 billion the government owes in arrears, Mutati said in his office. He spoke before flying to the U.S. to attend the IMF and World Bank Spring Meetings that begin today.
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