Govt must heed IMF advice on Eurobonds, says Saasa

Sat, 17 Dec 2016 10:59:22 +0000

By BUUMBA CHIMBULU

 GOVERNMENT should heed the advice of the International Monetary Fund (IMF) not to refinance the US$2.8 billion Eurobonds at the moment until financial conditions on the market have eased, says Professor Oliver Saasa.

Government issued a US$750 million Eurobond in 2012, followed by a US$1 billion issue in 2014 and another worth US$1.25 billion last year, mainly for infrastructure projects.

The bonds will fall due in 2022, 2024 and 2025.

Economist Prof Saasa explained in an interview that financial conditions on the market were currently quite tight which posed a challenge to Government because it was expensive to repay a debt.

Prof Saasa explained that the global market was currently stressed especially after the United States of America raised its Federal Reserve’s rates by 0.25 percent.

“That was a timely advice and I hope the minister (of Finance) will take it while monitoring happenings on the global market to influence the decision and choices to be made.

“On Tuesday, the Federal Reserve Bank  increased the interest rates by 0.25 percent which will make the dollar very attractive and this may lead to an appreciation because of the increased demand,” he said.

He said it was important for Government to be sensible about the current global macroeconomic fundamentals before making certain decisions.

“The financial markets are quite tight now which makes it a little bit of a challenge for Government. These are macroeconomic fundamentals at the global level that one should be sensible about.

“You also need to know that the IMF mission is about to come. The reason they shifted to early next year is because they have to see if the Budget will be approved by Parliament and then decide where they can propose to Government for possible adjustments,” he said.

Prof Saasa also said Zambia’s debt was carrying an overhang as it was more in excess of about US6.7 billion, most of which was in form of Eurobonds.

He also emphasised that more than 50 percent debt stock for Zambia was in the private sector.