By BENNIE MUNDANDO
THE stable rating outcome on the Zambian economy by Standard and Poor’s is a confirmation that the country’s Economic Stabilization and Growth Programme (ESGP) is firmly grounded and is producing positive results, Finance Minister Margaret Mwanakatwe has observed.
Last Friday, Standard and Poor’s confirmed other independent economic rating agencies such as Moody’s Investor Service and Fitch after grading the Zambian economy at B with a stable outlook.
Commenting on the development yesterday, Ms. Mwanakatwe said the rating outcome demonstrated the international community’s recognition of Government’s strong commitment to the implementation of the economic stabilization and growth reforms, which are targeted at continued macroeconomic stability, fiscal consolidation, and a corresponding accommodative monetary policy stance.
She said the rating was also a good signal and an assurance to domestic and external investors whom she said were crucial stakeholders in the country’s quest to achieve higher economic growth rates, that Zambia was committed to setting the right conditions for them to realize value from the economy.
“As Government, we undertake to sustain this positive performance and will address the outstanding structural, quantitative, and policy reforms that are needed for the country to remain on the right track and consolidate the current gains in our economic stabilisation and growth journey.
“To demonstrate the positive impact of our reform actions, the first bond auction on Government securities for 2018 was last week oversubscribed. Government towards the end of last week went in the domestic market to raise K1.65 billion but, gladly, both domestic and foreign bond investors placed bids totalling K3.35 billion, leading to an over subscription of 130 percent,” Ms. Mwanakatwe said.
She said in line with Government’s resolve not to crowd out the private sector in Zambia, it was gratifying that the auction recorded substantial participation by foreign investors adding that the development underscored the confidence that the international community had in the economy’s firm fundamentals and generally the positive prospects for business and growth.
“The weighted yield rate at 18.63 percent, remained largely changed from the last Bond auction in 2017, signalling the high competition by investors. With this positive performance, I wish to reassure citizens that the Government will move to address concerns around the rating of high risk of debt distress by implementing a number of institutional and legal reforms. These reforms will assure continued debt and fiscal sustainability going forward.
“Further, the Ministry of Finance, working with the Bank of Zambia, will focus on addressing high lending rates as they are a binding constraint to economic growth. In response to this policy initiative, the Bank of Zambia at its last monetary policy committee meeting reduced the policy rate to 9.75 percent from 10.25percent and the reserve ratio to 5percrnt from 8 percent.
“As Government under the leadership of President Edgar Lungu, we will work diligently to ensure that the confidence of our people and that of investors in our good intentions to stabilize and grow the economy, are not taken for granted.” she said.