Reuters report that foreign holdings of Zambian debt have fallen to their lowest since 2005, reflecting uncertainty over the direction of policy following elections last year and the spillover from the global financial crisis, a central bank official said on Tuesday.
The Bank of Zambia also wants to consolidate the 170-plus bonds in circulation to spur trading in the secondary market, the bank’s assistant director of market operations, Jonathan Chipili, told Reuters in a phone interview.
Offshore investors’ holdings of Zambian government bonds are less than 5 percent of outstanding debt, the lowest proportion since foreigners were first allowed in to the market seven years ago, Chipili said.
September’s election, in which populist opposition leader Michael Sata unseated Rupiah Banda’s Movement for Multiparty Democracy, looked like one significant factor, he said.
“The participation of foreign investors in our securities market has reduced, even prior to the elections,” he said.
“They want to be sure how the government is going to steer its policy.”
Since coming to power, Sata has made a series of decisions that have unsettled investors in Africa’s top copper producer, including reversing the sale of state telecoms firm Zamtel and doubling mineral royalties for copper miners to 6 percent.
Last month, Fitch cut Zambia’s rating outlook to negative from stable, citing concerns about the government’s actions.
In addition to Zamtel, Sata’s administration has reversed the $5.4 million sale of a domestic bank to South Africa’s FirstRand.
Chipili said the euro zone debt crisis was also to blame for the declining foreign interest in a high-risk frontier African market.
“It’s difficult to argue that the lower participation of foreign investors is purely due to an election,” he said. “It’s a combination of factors.”
Offshore holdings of bonds were at their highest in 2008, accounting for 18.08 percent of all bond holdings, while 2011 saw the highest foreign holdings of Treasury bills at 13.35 percent.
Zambia’s central bank last week rolled out a monetary policy framework to replace money-supply targeting, setting its inaugural benchmark interest rate at a high 9 percent, effective from Monday.
Chipili said the central bank was also talking to the Ministry of Finance about reforms to improve trading in the secondary market, including introducing a primary dealership system and consolidating the number of outstanding bonds.
Just 1 percent of bonds in issue are traded on the secondary market, he said.
Zambia issues bonds in six maturities ranging from two to 15 years. But the adoption of a multiple pricing approach means each bond has its own price, Chipili said.
“We’ve got so many bonds on issue, so the bond market is highly fragmented,” he said. “What we want to do is to have whatever is circulating on each tenor consolidated into one bond so that they’ve got the same maturity date and when we reissue they should have the same price.”
The bank hoped to introduce the reforms this year, he added.
[Reuters]
Fair enough. About time we started sorting out our own issues without getting into debt. If South Korea did it, we can also did it.
Suffering will start roughly a year from now…………self inflicted misery!
We can manage to do that the moment we sort out our stupid political differences and make the playing field square and fair!
Get to work guys.
Interest and inflation target system is very much welcome and has taken too long if I may add…. despite the down rating once fiscal policies are in place the same investors will come back… Europe right has a lot of uncertainties, American recovery slowing so Africa is still the best place to invest. Africa has just failed to play a major contributing and controlling player in the global world while our materials are being molested through out. To me AU, SADC, ECOWAS etc are still blind or get corrupted with making develop countries’ dance to us. Africa has the skills now lets develop before we too join in looking for materials to survive…WAKE UP
LEKENI SATA ATEKE. BEHIND YOU 100% SHIKULU
It’s amazing how many factors can determine progress. We actually for the most part as a continent were expected to not be as rocked by the financial meltdown because of being economies where the majority of our people use cash over credit so a lot of focus is on the emerging markets and investment opportunities therein. My hope is that those who have benefited from a better education or are entreuprenerial in nature start to think out of the box and find methods of developing new industries that do not rely on government assisted implementation. That could be a potential balance changing factor which could one day influence improved policies. Long shot but achievable…
Ama reshuffles here and there, today and tomorrow not to mention the day after and that other day that week plus poor governance policies has done us bad..So many uncertainties in our government.
we should not always be blaming everthing on the election.we should learn to stand by ourselves,not all the time borrowing.an economy does not improve on nkongolezi.a nkongole is a liability.outsiders are always trying to take advantage of us,what they lend us is far beyond what they reap.lets try by all means to work hard as zambians and improve our economy by ourselves.lets not wait for a muzungu to come and invest for us to feed our families.let us zambians invest and employ our fellow zambians.govtment should play a role of formulating good policies that will encourage more zambian enterprenuers,come on guys we can do it. lets also change the sylabi of our education system that will encourage life skills rather than educating job seekers.one zambia one nation is our motto.
Excellent news. When you are in debt the last thing you want is more debt. Let them go to hell. We don’t need no more nkongole tools!
GOOD SIGN, WE DON’T NEED TO BE BORROWING SO THAT IT CAN BE STOLEN!
Also means we don’t have to PAY OFF SHYLOCKS, we can then maybe have the proverbial, “MORE MONEY IN OUR POCKETS!!!!”
The goodness with these chikwakwa professions is that any one can say anything as long as he sounds convincing. You cant prove anything before it happens. But I dont believe most the crap.
(edited version) But I dont believe most of the crap
Zambia is fast on auto reverse back to unip days of uncertainaty. Chikwanda and gondwe have taken us there
Number of foreigners lending money to Government now lowest since 2005 – QUESTION: IS IT GOOD OR BAD? answer: GOOD x 10. who wants to leave on Nkongole on this planet earth….SATA at work….dont forget, the presido once told us he has a bachalors degree in Economics & Party Mobilisation…..inshimbi ninshimbi bane! let MCS rule!!
Are these financial “infestors” worried about possible introduction of controls on forex, capital flight, prices, and ownership of large companies including mines? If I had serious money I would not risk it in Zambia with that guy at Sata House.
Hence the continuous loss of value of the Kwacha
Do people think more foreign debt is a good thing? And an overvalued kwacha? Education seems to be lacking. Overvalued kwacha is only good for diasporans who are somehow funded from home, and for importers. It’s bad for tourism, copper revenues and other exports. It’s not rocket science
You will eat sata you fulls
A country in auto-pilot is better than a country in reverse under the auspices of Ukwa man of weakness. He has failed to fire a single soul that has failed to meet their key performance indicators.
This is very good news to Zambia. What we NEED is investment not debt (inkongole awe). Please also report that Zambia’s FDI has increased to a record high of $3bn. So dont judge Zambia by its ability to borrow. That’s why Fitch’s Report is meaningless. Go Zambia Go. Investment, not inkongole awe!Â
MMD used to pride itself in high sounding statistcal words but people had no jobs at the end of the day.
No sane person would lend money to people who have no credentials.
BOSS BA YAMBEZHI, SINCE YOU HAVE CREDITIALS GO AND BORROW FROM THE IMF…NOT MOTHER ZAMBIA UNDER ONE MCS!!
This is good for the country, even you as a person do you think borrowing money to feed your belly means you re solving your problems? the answer is no, the fact is that you re putting money problems on your self.
MMD used to borrow money to put it in there bellies, pockets & planting it (liato), was that good for the country? No, only few people benefited from that money but majority of Zambian citizens suffered for things they didnt know & never benefitted from……
Lets go King Cobra SATA, its time Zambia used its copper money to develop the country not only by name ati Africa’s highest copper producer but serviving on inkongole……Nifinshi fyawamapo boi pamu tende (peace) nensele (inkongole shilasebanya)?
This is good for the country, even you as a person do you think borrowing money to feed your belly means you re solving your problems? the answer is no, the fact is that you re putting money problems on your self.
M.MD used to borrow money to put it in there bellies, pockets & planting it (li.ato), was that good for the country? No, only few people benefited from that money but majority of Zambian citizens suffered for things they didnt know & never benefitted from……
Lets go Ki.ng Co.br.a S.AT.A, its time Zambia used its copper money to develop the country not only by name ati Africa’s highest copper producer but serviving on inkongole……Nifinshi fyawamapo boi pamu tende (peace) nensele (inkongole shilasebanya)?