In the labyrinth of a debt restructure, Africa’s second largest copper hotspot Zambia could be on the cusp of a long awaited breathrough in the week. Markets eagerly await outcome of a proposal surrounding Zambia’s debt plan as creditors deliberate on Wednesday. The Southern African nation seeks to access the second tranche of the $1.3 billion extended credit facility amount of $188 million earmarked to be disbursed on condition that creditors provide assurances on restructure.
READ ASLO: Creditors Hope To Propose Zambia Debt Plan This Week
At the last International Monetary Fund and World Bank Spring meetings, China relaxed its stance on Multilateral Development Banks sharing in on haircut losses which was a major breakthrough in talks that have protracted for months. Zambia will end the week with a bond sale that seems to be attracting offshore interest on the back of optimism surrounding the outcome of creditor deliberations. This has given the Kwacha a positive cue manifesting in a rally as the copper currency firms against the United States Dollar.
“There has generally been scarcity of dollars with most bureaus struggling to absorb demand in the wake of uncertainty and general demand outwitting supply. Any sort of positive news will trigger a rally which unfortunatley withers if expecations do not materialise. Markets are somewhat fatigued and have grown weary of the wait,” ZATU Financial Consultants Managing Partner Munyumba Mutwale said in a note. The volatility is a sign of the currency communicating uncertainity to the markets clearly.
Zambia remains the fulcrum of direction as it was the first and only country to default in pandemic times. Its debt treatment will signal how all other emerging and frontier markets will have their restructure obligations managed. The Southern African nation continues to maximise its economic policy diplomacy to restore fiscal fitness and agenda led by Hakainde Hichilema on whose clock the copper producer got an ECF approval.
Despite the fiscal vulnerabilities, the economic reforms Zambia has aggressively undertaken have earned it one of the most attractive capital destinations given a globally chaotic world. Zambia seeks to ramp its red metal production to 3 million metric tons in the next decade as it positions itself for the electric car era in an aggressively decarbonising world.
This week from the 22-23, June 2023, France is set to host an international Summit for a New Global Financing Pact to be led by Emmanuel Macron at which the announcement is likely to be made on the sidelines. Markets remain sanguinely expectant of a breakthrough for Zambia. The summit will attract various dignitaries including Zambia’s head of state.
As at midday in the capital Lusaka, the Kwacha was selling for K17.25/17.55/USD after opening at K18.0/USD. The Kwacha closed yesterday’s trading at K19.5, opened today at K18.0 to rally intraday morning to K16.9 afterwhich it settled at K17.35.
The Kwacha Arbitrageur