ZAMBIA MARKETS SEARCH FOR CLUES IN 2020 BUDGET PRESENTATION
Zambia’s Minister of Finance’s monetary lens to view the fiscal will be litmus tested on Friday, 27 September when Dr. Bwalya Ng’andu presents the national budget to parliament. The MinFin minister is the second former central banker to move to the fiscal side after Dr. Mulenga Pamu the current Permanent Secretary of Budget and Economic Affairs at the ministry. Will the two former central bankers view the fiscals differently with a monetary lens? Markets earnestly search for clues on what Friday’s pronouncement will mean for the money markets (treasury bills and bonds) from a domestic resource mobilization and taxation perspective. The suppressed private sector looks forward to potential stimulus measures the Minister will propose for them given that the last (11) months have be tough and marred by elevated operating costs in fuel, lack of liquidity and weak aggregate demand. International dollar bond holders will seek for clues on dollar debt redemption strategy while local players and SMEs need answers to when the ballooning K16.7billion domestic arrears will be dismantled to allow them access liquidity they have been deprived of. Energy analysts will be looking to connect the dotted line between climate change pronouncements the President made in his SONA and Friday’s budget while keen to track any allocations towards power generation projects and the current deficit. The Chamber of Mines have persistently echoed the need to shelve sales tax and rethink mining tax regime at a time when resource mobilization is priority for the Zambian government. The tough question everybody is asking is, does the fiscal side have latitude for stimulus?
Zambia’s economy currently grapples with a 700MW energy deficit, suppressed growth and rising inflationary pressure exercabated by drought effects and bearish fuel prices. Kwacha curve risk is high as inflation uptick narrows the premiums above the current yield curve. Should this actualize, repricing risks in the term debt space will levitate higher.
1H19 REFINED COPPER OUTPUT SLID 1%
H1:19 global refined copper output slid by a marginal 1% weighed by 2.5% slackening of output in the world’s largest copper miner Chile backed by a 55% decline in concentrate production in Indonesia as it’s two key mines migrate to different ore zones. Zambia and Democratic republic of Congo’s combined 1H:19 output was unchanged at 23% from a year ago with Zambia’s output edging lower 28% (due to mining tax effects and power woes) offsetting DRCs growth in output. Mongolia, China and Australia posted growth in 1H19.
US POLITICAL RISKS RISE WITH IMPEACHMENT ENQUIRIES ON TRUMP
Political risks in the United States are the newest set of risk drivers that are weighing stock and bond markets after the house of representatives constituted an impeachment inquiry for US Donald Trump who is accused using foreign support to smear his democratic rival Joe Biden in next years election. Asian markets were down 1% with the dollar proving a safe heaven currency rallying 0.2% as measured against a basket of (6) major currencies (DXY) at 98.23.
Underwhelming data out of German for factory output continues to weigh confidence denting the euro zone outlook negatively with effects evident in the crude markets as ice Brent futures international benchmark pricing at $63/bbl. as WTI US crude futures slide to $57/bbl. Geopolitical tension continued to detente in the Middle East.
Other risks driving the global outlook include Brexit and autopsy effects of US China trade impasse which Trump unwound yesterday when he openly criticized China’s trade practices at a UN meeting.
The Brexit Consultant
