Zambia will rearrange loans from Chinese companies and instead look to borrow directly from the Asian giant’s government in a bid to satisfy International Monetary Fund conditions and unlock a potential $1.3 billion loan from the multilateral lender.
On Saturday the Zambian presidency said borrowing directly from the Chinese government would ease the repayment burden after the IMF on Friday rejected Zambia’s latest plan, saying it would make it harder for the country to sustain its debt load.
The presidency and treasury did not respond to requests from Reuters to clarify whether the Chinese government would now underwrite the loans from the firms or grant Zambia new loans.
It was the second time in under six months the IMF had rejected a Zambian proposal, causing the southern African copper producer’s dollar-denominated bonds to fall across the curve on Friday.
“The decision was made before we restructured our Chinese loan,” presidential spokesman Amos Chanda said, referring to the IMF rejection. Chanda said there was “no possibility of default” on current and future debt.
”We will not go to the ends of the earth to pursue an IMF programme. If it does not come, we will continue with our own programme, which is already delivering results,” Chanda said.
Zambia’s total public debt at the end of August 2017 stood at $12.45 billion representing 47 percent of gross domestic product.
The country issued Eurobonds worth $2.8 billion between 2012 and 2015, and has said it plans to refinance those bonds to cut the cost of debt servicing in a broad strategy to keep debt levels from spiralling.
“Our future engagement with the IMF will be anchored on investment in the social sector. What is best for Zambia is what the government has put across since November 2015,” presidency spokesman Chanda said.
Earlier in the week president Edgar Lungu appointed new finance and mining ministers in a reshuffle affecting numerous other departments, heightening concerns over the country’s financial and political stability.
Reporting by Chris Mfula; Writing by Mfuneko Toyana; Editing by Andrew Bolton (Reuters)
South Africa’s rand steadied against the dollar in early trade on Monday, holding near a three-year high touched on Friday after President Cyril Ramaphosa said tough decisions would be made to repair the economy after years of stagnation.
South African bank notes featuring an image of former South African President Nelson
At 0645 GMT, the rand traded at 11.6600 per dollar, not far off its close of 11.6375 on Friday.
The currency raced to a three-year high of 11.5600/dollar on Friday after Ramaphosa said his government was committed to “policy certainty and consistency” and that tough decisions would be taken to close the fiscal gap and stabilise debt. [nL8N1Q64UL]
“Despite the markets appearing to receive the (state of the nation address) well, there remains much to be done to rescue the local economy and this will undoubtedly take time after nearly ten years of mismanagement and corruption,” Nedbank analysts said in a note.
Ramaphosa was sworn in as head of state on Thursday after his scandal-plagued predecessor, Jacob Zuma, reluctantly resigned on orders of the ruling African National Congress after nine years in office blighted by corruption allegations and economic mismanagement. [nL8N1Q51P4]
Market focus this week will be on Finance Minister Malusi Gigaba’s budget speech on Wednesday.
In fixed income, the yield on the benchmark government bond due in 2026 was down 3 basis points to 8.08 percent, reflecting stronger bond prices.
Reporting by Olivia Kumwenda-Mtambo; Editing by Biju Dwarakanath (Reuters)