Fri, 29 Dec 2017 10:48:59 +0000
By Buumba Chimbulu
GOVERNMENT is determined to set up a sinking fund to refinance the Eurobonds despite concerns from the World Bank that the approach will not work following Zambia’s large fiscal deficits.
Government announced that it has set aside US$20 million for the refinancing of its three Eurobonds – the US$750 million, US$1 billion and US$1.25 billion – all falling due between 2022 and 2027 respectively.
But the World Bank said the sinking fund method to refinance Eurobonds will not work for Zambia due to its persistent large fiscal deficits which makes saving impossible.
Minister of Finance, Felix Mutati, however, said the sinking fund, to be established by law, would be set up as a sub account of control 99 where all Government revenue was kept.
“Government will still set up the sinking fund because it is by law and you cannot argue with the law. We will establish it because it is by law to keep the deficit neutral,
“It is a transit account that is used for repayment, it does not necessarily mean that funds will be locked in that account, it will be for the purposes of maintaining within our deficit parameters,” he said.
Mr. Mutati said in an interview that Government would be prudent to the extent that it did not keep money unutilised while incurring interest generated by the deficit. He disclosed that Government would next month establish a broad strategy which would assess the market for the Eurobonds.
Mr. Mutati emphasised that Government had multiple options to refinance the Eurobonds.
“Buying back is just one of the mechanism that we can do another mechanism will be to roll over so there are several options we have to address the Eurobonds, including finding money to pay,
“So there is no singular option to address the matter, there are multiple including domestic revenue enhancement. We do not have a bullet option, we have a combination of options to deal with the problem,” Mr. Mutati said.
Mr. Mutati said while considering all these options, Government would ensure prudent management.
