Monday, October 27, 2008

Investors withdraw US$40m from treasury bills

Lusaka Times, October 25, 2008

Zambian Economist Chibamba Kanyama has disclosed that about US$40 million has been withdrawn from treasury bills by investors.

Mr Kanyama said investor confidence has been eroded due to the political situation prevailing in the country.

Speaking in an interview with ZANIS in Lusaka today,Mr Kanyama observed that this has led to the continued depreciation of the Kwacha saying most investors were holding on to the dollar.

He said the depreciation of the kwacha was also triggered by the death of Zambia’s late President Dr. Levy Mwanawasa hence investor uncertainty in the country’s future.

According to Citi Bank, the Kwacha was selling at K4, 350 and buying at K4,400 per US dollar as of Tuesday while rates at the Bank of Zambia as of today stood at K4, 440.11 buying and K4,460.11 selling.

Mr. Kanyama pointed out that investors were not sure if the new government would have respect for property rights and conditions for foreign investment.

He further said investors were also uncertain of the new government’s capacity to honour obligations like debt payments adding that the capacity to attract foreign aid was also a matter of concern.

Mr. Kanyama said copper prices on the world market have also registered slow growth than the annual average saying the price has reduced and it will continue to nose dive.

He further said imported goods will be expensive and manufactured goods will command high prices and interest rates making inflation levels to skyrocket.

Mr. Kanyama said the global oil prices has also affected many countries negatively adding that only when the global political level normalises will the situation stabilise.

He predicted that if a new government comes into power, it would incur deficit and will spend more in order to cushion levels of poverty adding that this will not be good because it will further destroy investor confidence.

Mr. Kanyama said a good balance between expenditure and revenue is what will save the next government only if they tighten spending saying investors were waiting to see what the incoming government will stand for before considering new investment.

On the credit crunch that has affected the United States of America, the Economist noted that China which was a major driver of Copper prices was equally going through recession.

The Economist said the impact of this financial crisis on Zambia was mainly due to investors having no money as they were the major drivers of demand adding that there was no supply from the stock market.