Zambia’s borrowing costs rise
The cost of borrowing on Zambia’s benchmark Treasury bills rose to its highest in more than four years, reports Thom Shonga for the Zambian Eye.
According to reports by Bloomberg Zambia’s central bank the Bank of Zambia (BoZ) is taking measures to cap liquidity among lenders curbed sales of the debt.
BOZ sold 268.2 million Kwacha (US$44 million) of the total 600 million Kwacha of notes offered on the 3rd of April 2014 auction in Lusaka, Zambia’s capital city.
The central bank increased the minimum statutory reserve ratio for lenders to 14 per cent from 8 per cent and raised it key lending rate to a record last month.
The Kwacha depreciated by 9.7 per cent this year, the worst among African currencies and this will eventually push Zambia’s inflation up as it is heavily reliant on imported goods both for industry and consumption. Zambia imports fuel, groceries and machinery.
A Lusaka based analyst at African Life Financial Services Mwiya Musokotwane said: “The central bank is seeking to help stabilize the Zambian Kwacha in order to ensure that inflation is within its target”.
“As liquidity generally rises again, banks are likely to migrate assets to government securities. These will likely lead to increased auction participation, that yields are attractive,” Mwiya said.
At its two previous auctions, the central bank sold 186 million Kwacha of the 1.2 billion Kwacha offered. Last week the Kwacha weakened 0.2 per cent 6.16 per Dollar.
Meanwhile, Standard & Poor’s today affirmed Zambia’s creditworthiness at B+/B with a negative outlook and Fitch Ratings on March 21 held its rating at B, five levels below investment grade.