Foreign exchange reserves in Zambia likely to dwindle to $1bn by June

The Standard Bank Group that trades in Zambia as Stanbic Bank has forecast that foreign exchange reserves in Zambia could decline further to USD 1 billion before the end of June.

The Standard Bank Group says in order to raise the funding required to repay Eurobond maturities, presuming that refinancing is not an option, Zambia would easily sell some of its assets. Bank Head of Africa Research Phumelele Mbiyo said the tentative forecast is based on discussions that the bank officials had with the Bank of Zambia during a recent visit to Lusaka.

The Bank says in a report Déjà vu, the amount of external debt service payments was sufficiently large to suggest that foreign exchange reserves could be closer to USD 1.2 billion or even USD 1.1 billion by the end of March.

"What was conspicuously lacking was a plan to quell this persistent drain. Of course, operationally the BOZ would buy Forex from the market in order to accumulate the Forex it requires to continue servicing external debt. We were left with the impression that policymakers are bemused by the market's obsession with whether the government would seek an IMF-funded program," the report read, as reported by Lusaka Times.

The report also stated that it is clear that the government of Zambia does not see the level of the fiscal deficit as an issue and neither has it ever seen it as a key lever with which it could arrest the deterioration of the Balance of Payment.

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