“Zambian gross Foreign Exchange (FX) reserves fell to USD1.27bn in January from USD1.42bn in December 2019. The pressure on gross FX reserves over the past 2 years is not relenting.
The local currency, the Kwacha has deteriorated to K16 per US Dollar making market players believe that current minister of Finance Bwalya Ng’andu is unfit for the top financial political position. Dr Ng’andu replaces Margate Mwanakatwe in late 2019 a move that some experts thought would lead to some sone economic improvements. But the opposition seems to be the truth.
Dr Ng’andu has so far improved nothing, FX reserves continue, dwindling, Kwacha continues losing value, government is failing to pay most civil servants with municipal workers and TEVETA institutional lecturer all on strike for non payment of salaries. There are currently Millie meal shortages in most parts of the country. Dr Ng’andu has failed to secure a bailout package from the IMF.
Dr Ngandu was an under governor of the Bank of Zambia, but was appointed minister of finance a position that now looks to be too big for him.
Recall that for much of 2019 gross FX reserves were hovering around USD1.4bn, down from USD1.89bn in January 2018. It appears that the government’s debt service payments continue to exert pressure on FX reserves.
The government’s debt service payments jumped by 20% y/y to USD204.6m in Jan. The government has budgeted for over USD1.6bn in external debt service payments in 2020. According to the BOZ, FX outflows that cover the government’s debt service totalled USD1.2bn in 2019 and USD959m in 2018. More interestingly, copper prices are stuck around USD5,500/MT despite the market dislocation that followed the spread of Covid-19. So, it seems as if copper prices will not exacerbate the drop in copper export volumes in 2019.”