FINANCE minister Margaret Mwanakatwe says Zambia will not take unilateral action on bond holders should the offer from Turkish company that is being courted on refinancing the 2022 Eurobond crystalise.

Mwanakatwe insisted that the government stood by the commitments made to bond purchasers at the time of issuance of the Eurobonds not to take any action without consulting them.

“Further, government wishes to shade more light on the statement made by the President of the Republic of Zambia, Mr. Edgar Chagwa Lungu regarding a Turkish company that is being courted on refinancing the 2022 Eurobond. Whilst we are open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors, this exercise will be done in full consultation with the bond holders and in accordance with international market standards. If the offer from Turkey crystalises, no unilateral action will be taken by the government. We stand by the commitments made to bond purchasers at the time of issuance of the Eurobonds not to take any action without consulting holders of Zambia’s Bonds,” Mwanakatwe explained in a statement yesterday.
“Further, the government wishes to emphasise that such an operation is not in any way a signal of failure to repay the Eurobonds. We remain fully committed to meeting all our liabilities on time and in full. In line with the foregoing, we have developed a redemption strategy for the three Eurobonds. The strategy is currently undergoing integrity reviews prior to seeking Cabinet approval. Further, the government is in the process of engaging financial advisors on implementation of the strategy. In so doing however, we are duty bound to interrogate any other asset/liability proposals that may come from other private and bilateral partners, with the proviso that it should be cheaper and procedural in terms of international capital markets operations.”

She stated that her ministry had developed an implementation and progress dashboard on the fiscal prudence, economic stabilisation, and growth measures.
“Whilst rating agencies wait to take our actions into account in the medium term, it remains the firm resolve of the government that the impact of these measures begin to manifest in 2018 – hence the speed with which the implementation is progressing. The dashboard is reviewed weekly by top management of the Ministry and progress reports are submitted to Cabinet to ensure that there are no slippages. The Ministry of Finance will continue sharing with the public monthly reports on the performance of the economy and holding quarterly engagements with a cross-section of stakeholders in order to enhance information availability and exchange,” stated Mwanakatwe who added that the government had put up measures to tackle the challenges related to debt, liquidity, and the fiscal deficit.
“Zambia last week received its rating assignment from Fitch Rating Agency that re-affirmed its rating at B Negative Outlook and Moody’s Ratings that assigned a downgrade rating of Caa1 Stable Outlook. The government has noted the ratings and has discussed the issues raised by the agencies’ analysts. For the reasons that have been raised in the rating reports, particularly the Moody’s Rating Agency’s report, stakeholders and investors may recall that government on July 14, 2018 announced a number of measures. The measures are swiftly being implemented as part of our broader policy reform to tackle the challenges that relate to debt, liquidity, and the fiscal deficit. These measures will lead to slowing down the rate of debt accumulation in 2018 and over the medium term and tackling the fiscal deficit which we forecast to be below the 2017 announced deficit of 7.8 per cent of GDP.”

She stated that as a minimum, the arrears dismantling provision would be maintained at the current level as it was cardinal to fiscal sustainability and liquidity normalisation.
“The government has also started to implement the policy on completion of projects that are 80 per cent and above. In this regard, the treasury has released more than K2 billion in two tranches, the latest being K1.3 billion released during the last two weeks, to finance domestically financed projects in this category. This will address the problem of incomplete projects, stop costs in standing time and curtail the accumulation of arrears to contractors that are triggered by partial work being done due to resource constraints. On the external side, the government has begun to work on measures to define dedicated streams for reserve accumulation. This is being done side by side with the asset/liability management exercise on external debt and the cancelation and postponement of some pipeline loans,” Mwanakatwe stated.
“… Already the Public Financial Management Act was signed into law in April 2018. This law will tackle the recurring problems of fiscal mismanagement through strict sanctions for imprudent management of resources. The new law places personal responsibility for mismanagement on officers at an operative level, controlling officers and other policymakers.”
She stated that the new law also stipulated offences and severe consequences for mismanagement of public funds.
She stated that other legislation related to fiscal prudence would soon be progressed.
“These include the Planning and Budget Bill and the Public Procurement Law; pieces of legislation that are core to fiscal prudence and responsibility…These reforms are helping in supporting better growth and attaining budget predictability going forward. Reforms put in place in 2017 to address electricity, agriculture and fuel subsidies have resulted in the government being able to address costs that resulted in arrears. So far the government has through this reform addressed the accumulation of electricity arrears that were costing US $21 million per month,” stated Mwanakatwe.
“Arising from the reform, the mining sector is now paying 9.3 cents per kilowatt hour for electricity compared to the 5 cents that was being paid by sector players prior to subsidy reforms. In the agriculture sector, we attained a cost reduction in the last farming season of up to K1.7 billion as a result of the change in the facility transmission mechanism to electronic vouchers…”