Sunday 23, September 2018 by Bloomberg

Kwacha catches Zambian debt flu, plunges to near three-year low


The sell-off of Zambian assets has now infected the copper producer’s currency.

The kwacha had been resilient in the face of a debt crisis that’s seen Zambia’s Eurobonds plunge the most in emerging markets this year. But that changed this week as it fell 7.2 per cent against the dollar, the most among 144 currencies tracked by Bloomberg, to its weakest level in almost three years.

This week’s developments have only added to the concerns of investors, many of whom are convinced President Edgar Lungu needs to turn to the International Monetary Fund for a bailout. The UK suspended aid amid allegations Zambia’s government misused funds, and the World Bank cut its growth forecasts for the country, citing lower copper prices and burgeoning public debt.

And it could get worse. Real yields on kwacha T-bills of over 10 per cent probably won’t be enough to entice foreign traders back into the market as long as the government struggles to fix its finances, according to Standard Bank Group Ltd.

“It is likely that the Zambian kwacha will still depreciate despite elevated real yields,” said Phumelele Mbiyo, an economist at the lender in Johannesburg.

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