ESQ Legal Practice Magazine JUNE 2014 EDITION | Page 35

ZAMBIA LURES
FOREIGNERS BACK
TO DEBT WITH RECORD
T-BILL YIELDS

A

rally in Zambia's
kwacha, the
world's secondbest performing
currency this
month, and record high yields
are attracting foreign investors
back to the nation's Treasury
bills.

Lusaka-based central bank
said in an e-mailed statement.
Zambia's kwacha gained 9.6
percent in June, the most in
the world after Papa New
Guinea's kina, paring losses
for 2014 to 12 percent. Zambia
agreed to start talks with the
IMF on a program to contain
its budget deficit, which may
include a loan, the
government said a week ago.
The central bank has raised
interest rates to a record to
support the currency and tame
inflation, while boosting
overnight rates and ordering
reserves be set aside for
accounts held abroad to clamp
down on speculators.

The Bank of Zambia sold 475
million kwacha ($76 million)
of securities yesterday after
getting 603 million kwacha in
bids, the first time demand
exceeded supply since Feb. 20,
according to data compiled by
Bloomberg. Yields on 364-day
bills rose to 19.99 percent, the
highest since Bloomberg
began compiling data in 2005,
with the sale luring mostly
“The central bank have talked
international investors, the
down fears regarding the

35 I EsQ legal practice

currency of late and also their
expectations of the fiscal
deficit,” Nema RamkhelawanBhana, an Africa analyst at
Rand Merchant Bank, said
today by phone from
Johannesburg. “That perhaps
has shored up confidence.”

of a rebasing exercise that
found the economy is about a
quarter bigger than previously
thought, Secretary to the
Treasury Fredson Yamba said
on June 6.

“All the economic
fundamentals are still very
positive, so it shows they still
have confidence in the
Positive Fundamentals
economy,” David Chewe,
Zambia's budget deficit
investments director at
swelled to 6.8 percent of gross National Pension Scheme
domestic product last year
Authority, said by phone from
compared with a 4.3 percent
Lusaka, referring to bids from
forecast as corn and fuel
foreign investors.
subsidies and civil-servant
Yields on the benchmark 364wage increases boosted
day Treasury bills have
spending. This year's deficit
increased by 4.24 percentage
will be 5.2 percent of GDP,
points this year.
down from a previous forecast
of 6.6 percent, mainly because

www.esqlaw.net