from ARNOLD MULENGA in Lusaka, Zambia
LUSAKA, (CAJ News) – THE revival of the copper industry internationally, driven by the growth of the Chinese economy and projected rising production of electric cars, could be pivotal in Zambia’s efforts to redeem itself from its financial quagmires.
The Southern African country is meanwhile improving relations with lenders and restructuring its debt among other initiatives.
Copper surpassed the US$7 000/tonne at peak in October, for the first time since 2018.
This indicates the metal’s value is 12 percent up this year, spurred by demand in China, which is the biggest consumer of the red metal.
China’s economy has grown by almost 5 percent in the third quarter of this year as the Asian country defies the global impact of the coronavirus (COVID-19) despite it being the first to confirm cases, at the end of 2019.
Rand Merchant Bank forecast that over a multi-year period, copper prices could surge as electric cars become the norm.
This is given that these vehicles contain three times more copper than internal-combustion cars.
“This implies that major African copper exporters like the Democratic Republic of Congo (DRC) and Zambia could reap the benefits through higher export earnings and potentially stable exchange rates,” RMB stated.
Zambia is behind only the DRC in copper production in Africa, and seventh globally.
Meanwhile, the Washington-based International Monetary Fund (IMF) recently named Preya Sharma as Zambia’s resident representative, a development analysts believe mark a turning point in the relations between the lender and the copper-rich country.
“In what can be viewed as a move to improve relations between the IMF and Zambia, the fund has named a new resident representative,” RMB’s Neville Mandimika (Africa Strategist) and Daniel Kavishe (Economist: Sub-Saharan Africa), stated.
“The appointment of Preya Sharma comes at a pivotal time for Zambia, as it aims to reprofile its external debt.”
The RMB experts believe for eurobond holders, an IMF-funded programme would go a long way to ensure that the reform agenda was seen as credible.
Zambia has already missed a eurobond payment on its 2024 bond.
It nonetheless hopes to get a moratorium on interest obligations by mid-November.
Zambia earlier in October skipped an interest payment on its debt.
This sees the government of President Edgar Lungu edging closer to becoming the first African administration to default on dollar bonds since the onset of the global pandemic.
Zambia is already in arrears to the tune of $485 million in foreign debt. This includes $183 million to bilateral lenders and $256 million on commercial loans.
This is based on statistics by the Finance Ministry.
IMF and Zambia relations have been tetchy lately after the former apparently declined requests to support Zambia’s economic programme and for emergency assistance.
It is also believed the dismissal of central bank governor, Denny Kalyalya, in August also added to the relations declining.
Apart from the COVID’19 negative impact, Zambia’s financial woes are blamed largely on declining copper prices and severe drought.
During an October 2020 Sub-Saharan Africa Regional Economic Outlook Press Briefing, IMF Africa Director, Abebe Aemro Selassie, Zambia’s debt was already untenable before COVID-19.
“On Zambia, even before the pandemic and the economic crisis that has brought about in the region and elsewhere, country’s debt was an unsustainable trajectory. I think it’s been well known,” Selassie said.
IMF has forecast Zambia’s growth at around ‑5 percent in 2020, substantially lower than envisaged at the beginning of the year.
It noted the fiscal pressures in the year had increased due to significantly lower revenue collections and higher spending needs.
– CAJ News