ZAMBIA’S dollar notes have lost almost 20points over the past two months, with holders shedding paper that has lost its sheen thanks to rising external debt and alarm bells rung by the IMF.
The IMF said in late August that discussions over an aid programme were on hold because Zambia’s borrowing plans remain unsustainable. The country’s external debt rose to US$9.37bn by the end of June from US$8.7bn in December.
“Talks with the IMF have been slow, the budget deficit is estimated by the IMF to be close to 8% of GDP for 2018 and copper, which makes up around three-quarters of Zambia’s exports, is down by around 20% since its peak in early June,” said Richard Briggs, emerging markets strategist at CreditSights.
“Zambia has been trying to secure an IMF loan for several years but hasn’t yet been able to secure funding.” The country, which is Africa’s second-largest copper producer, wants a US$1.3bn loan from the IMF but the chance of a deal depends on its debt management plans.
A trader said that the inability to find common ground with the IMF and tackle the country’s debt problems was hurting the sovereign’s bonds.
“Zambia’s efforts to impersonate an ostrich is not going down well, so their dollar bonds make new lows, with even the 2027s above 15% now and local paper paying double that,” said the trader.
Zambia’s US$1.25bn 8.97% July 2027s opened August bid at 89.75 and yielding 10.778%, according to Tradeweb. But value has bled away with the notes losing nearly 20 points by Friday. They were last bid at 71.50 to yield 15.34%.
The sovereign said last December that it would begin refinancing Eurobonds worth a total US$3bn in 2019 to reduce the cost of debt servicing.
In June, Zambia decided to delay all planned borrowing indefinitely, slowing down the accumulation of new debt amid worries about the risk of distress. Zambia (Caa1/B-/B) has been downgraded by both Moody’s and S&P in recent weeks.
(Source: This story appeared in the September 7 issue of IFR Magazine)
World Bank gives $25 Million to Zambia with to help address COVID-19
THE World Bank has approved $25 million to support Zambia’s response to the COVID-19 (coronavirus) pandemic. Of this amount, $20 million will come from the International Development Association’s Crisis Response Window, while $5 million is grant funding from the Global Financing Facility. The funds will be channeled through the Zambia COVID-19 Emergency Response and Health Systems Preparedness Project.
The Zambia COVID-19 Emergency Response and Health Systems Preparedness Project will provide support to the Zambian government to prevent, control, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness. The emergency funding will support disease surveillance and strengthen screening at points of entry, risk communication and community engagement, as well as strengthen governance and accountability in implementation of the national COVID-19 response plan. It will also support COVID-19 case management, infection prevention and control, and interventions to maintain essential health services.
“While Zambia has seen a reduction in new cases of COVID-19 in the last two months, it is important that prevention, detection and response measures are scaled up to prevent further spread of the disease,” said Sahr Kpundeh, World Bank Country Manager for Zambia.
“Rapid response is crucial in addressing COVID-19 and to reduce its negative impact on health systems, social services and economic activities.”
The project will be implemented nationwide and is expected to benefit the entire population of Zambia, asCOVID-19 poses a risk to everyone. The primary beneficiaries will be suspected and confirmed COVID19 cases, and populations at risk such as the elderly, people with co-morbidities, medical and emergency personnel, port of entry officials and truck drivers.
“Considering that many of the COVID-19 cases in Zambia have come from outside the country, the project will help strengthen screening at Zambia’s entry points”, said Rosemary Sunkutu, Senior Health Nutrition and Population Specialist and Task Team Leader of the project. “This component of the project is especially important given that Zambia is a landlocked country surrounded by eight countries, which predisposes the country to risks of importation of diseases from neighboring countries and beyond.”
This funding is part of a broader package of support by the World Bank Group to help Zambia manage and responds to the COVID-19 crisis. The World Bank mobilized $2.72 million from existing health operations and financing mechanisms to support the Government’s COVID-19 response. World Bank Group COVID-19 Response.
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