Weak Kwacha threat to Eurobond debt, says expert


GOVERNMENT may experience problems in repaying the three Eurobonds loans if the Kwacha continues to be weak, says financial analyst Maambo Hamaundu.

Mr Hamaundu said that the current exchange rate of the kwacha would put more pressure on the Government to find money to finance the debt which he said would not be easy.

He said because of the weak Kwacha there had been an increase of  about 50 percent interest to finance debt from the normal rate which should be below that percentage.

“Dollar being at ten to kwacha means the cost of living generally for an ordinary Zambian will definitely go up, from the Government perspective, there is also the issue of financing debt which will become costly,” he said.

Mr Hamaundu said Government risked being under more pressure compounded with other challenges of ZESCO and the negative sentiments Zambia received in terms of economic outlook from international rating agencies.

He said in order to address the challenges faced for the better of the country’s economic outlook, Government needed to exercise discipline in the usage of resources by sticking to the plans it made.

Mr Hamaundu stated that Zambia had a budget deficit ranging from K8.5 to K20 billion due to lack of finance discipline by the Government.

He also said Government must set priorities in the correct order and ensure that policy makers were positive of their decisions regarding the country’s economy.

“For example, before Government went out to borrow for the third time on the European market, there was a downgrading of rating of our country on the international level and instead of addressing that particular matter which led to the outlook to be downgraded, they went on to borrow,” he said.

He noted that instead of trying to prove a point that Government was able to do everything, it should instead admit its mistakes and look for a better solution to fix them.

“Government is afraid to face its mistakes, all it is trying to do it to prove a point that it can do it. If you look at what is happening now, there are a lot of projects that are going on in many paces but the question is are they really necessary?”

“Could they have been delayed or put off? the answer is yes, but I do not know why they cannot suspend them but they went out and borrowed for projects which do not add any economic value to the country,” he said.