Business

‘Minimise expenditure to cushion Kwacha’

KALONDE NYATI, TRYNESS TEMBO, Lusaka
AS ZAMBIA begins to repay the US$750 million Eurobond next year, Government needs to minimise its expenditure to cushion the impact on the Kwacha, an independent financial market analyst says.
Zambia acquired three Eurobonds; US$750 million, US$1 billion and US$1.25 billion, with repayment expected to start 2022 and 2025 respectively.
In an interview yesterday, Maambo Hamaundu said the repayment of the Eurobond is anticipated to put pressure on the Kwacha because of the increased demand for the dollar to service the loan.
“There will be dollar outflows because the country will be servicing the loan in dollars. The country will require a lot of dollars and it is likely that the demand will outweigh the supply,” Mr Hamaundu said.
He said short and long-term measures will be required to cushion the impact.
“Government needs to cut its expenditure particularly, on foreign travels.There is also need to enhance Zambia’s productivity capacity so that the country imports less and exports more to ensure availability of foreign exchange,” he said.
Meanwhile, First National Bank (FNB) says if the United States (US) dollar continues to outweigh demand, the Kwacha is expected to maintain its strong footing against the greenback in the short-term.
FNB says that on Tuesday the local unit continued to hold ground against the greenback, trading firmly in the range of K9.86 and K10.00.
In its daily newsletter, the bank says firm bids remained below K9.80 and offer levels for dollar/Kwacha stood at K9.95 on Tuesday.
“Appetite for the greenback seems to have reduced significantly, while most offshore players are looking to offload dollars to generate Kwacha. We see the local unit coming off further today [yesterday] with trades below K9.80,”the report reads.
Cavmont Bank in its market report also says the Kwacha closed Tuesday trading at K9.90 and K9.95, K0.15 stronger than the day’s opening levels and is likely to remain firm in the short-term should supply continue to outweigh demand.
On Tuesday, trading session witnessed the local currency maintain its positive run against the dollar as it received further support from exporters and corporate sellers.
The bank says the local currency touched an intra-day high of K9.87 and K9.92 compared to the day’s opening levels of K10.05 and K10.10.
Similarly, Zanaco says the Kwacha is expected to continue trading with a strong tone against the dollar on the back of strong corporate inflows to meet month-end obligations.
“The Kwacha posted more gains against the greenback on Tuesday, helped by healthy corporate inflows with local unit demand expected to remain strong,” the bank says in daily newsletter.

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