Economy

EIU Forecasts Weak Kwacha in Absence of IMF Bailout

The Economist intelligence Unit (EIU) has forecast that the kwacha will remain under intense pressure in 2019 following the absence of an International Monetary Fund programme to provide assurance.

According the EIU report, the kwacha is forecast to hover around K12.58 to a United States dollar before things stabilize as projected in the first quarter of next year.

“The government’s failure to reach a loan agreement with the IMF has unnerved investors who fear an external debt default which would lead to capital outflows. This is reflected in the yield on Zambian Eurobonds which has risen from 7% to in February 2016 to 16% in early 2019,” reads the report.

The report has however projected that the economic outlook may improve if government reschedules its repayment plan for Chinese debt and also sign an agreement with the IMF.

“To improve access to foreign exchange, local businesses suggest approaches such as developing good relationships with the banks. Zambia’s precarious external liquidity position and the challenges it will face in servicing hard-currency debts falling due in 2019 will heighten expectations of devaluation and constrain availability of funding,” reads the report, adding that the situation is set to improve in 2020 following a forecast of improved copper prices.

From 2020, the EIU forecasts that the exchange rate will stabilize against the dollar on rising world copper prices which will boost export earnings.

“We forecast an average exchange rate of K12.40 to 1$,” states the report.

The outlook projects that things may improve in 2020 as long as government does not default on debt obligations.

The report dubbed “Hard Currency Availability and Debt Sustainability in Ethiopia, Kenya, Nigeria, Tanzania and Zambia” says the Southern African country has the highest risk distress out of the countries covered.

 

7 Comments

  1. Gangsta grabs

    I knew chinese loans were rubbish.How good is a loan if you are only given a paper to sign and commit but never the money? Rubbish

  2. Razor

    This people are far behind. We are now at K13 to a dollar and may even be going towards K15 Mark by end of the year.

  3. INDETU

    I’m not sure there’s a Government in the world today which can give another government a cash loan.
    The conditionalities now in practice include the Creditor to appoint a contractor with trot equipment. In this case money is paid directly to the contractor. The recipient government will only appoint consulting engineers.
    You may have noted that EU funded projects are carried out by European contractors, & Chinese funded projects are carried out by Chinese contractors.
    The reasons for this procedure is self explanatory. Don’t blame the Chinese government gor your lack of liquidity.

  4. Ck

    Safe this is what we’re still supporting

  5. Ck

    That is the reason why we have specialisation, someone who don’t know economic things.

  6. Ck

    Tiye Zambia go, next month k14 __ 1$

  7. we can change Zambia

    we can change Zambia if we stop tribalism and when choosing our leaders we put people who are really sympathetic to suffering Zambians if 4%salary increment we used it to form factories it would help a number of people but our leaders just know about vat increase

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