2015 started off with a bang – a tightly contested and peaceful presidential by-election coupled with the economic stimulus of a reduction in fuel pump prices. One can be forgiven for thinking things could only get better from there. Unfortunately, that was not the case.
Here is a recap of some of the factors that shocked the Zambian economy and their subsequent effects:
Copper, the country’s main foreign exchange earner (accounts for 70% of earnings), saw its price drop by 25% to end the year at about $4,701 per MT as a result of a slowdown in Chinese demand:
The Central Bank kept the policy rate unchanged at 12.5% until the next decision in May 2015. They cited the slowdown in China’s growth as a key component in the policy rate decision because it has a negative impact on global copper prices which in turn has a downward effect on the Kwacha and consequently inflation. This is the first policy rate decision since last month’s election.
2015 has started off in stark contrast to the previous year - January inflation slowed down for a second month in a row to 7.7 percent. According the Central Statistical Office (CSO), the slowdown was driven by a decline in food as well as some non-food prices.
Bank of Zambia raises policy rate by 50 basis points
The central bank raised the policy rate by 50 basis points to 12.5% until their next monetary policy committee meeting on 8th February 2015. They cited elevated inflationary pressures likely to last into the beginning of 2015 and material deterioration of the external sector (Balance of Payments deficit of $123.2 million in Q3 compared to a surplus of US $740 million in Q2) relative to conditions in August i.e. at their previous meeting. I’m pretty sure uncertainty over presidential elections was also baked into their decision but they didn’t mention it directly!
CAF inspectors in town to assess Zambia’s 2019 AFCON bid
Inspectors from the Confederation of African Football (CAF) are in town from the 9th to the 15th of August in order to assess Zambia’s bid to host the African Cup of Nations (AFCON) in 2019. The inspectors will be visiting various stadia, training facilities and accommodations in Lusaka, Ndola, Kitwe, Chingola, Chililabombwe and Livingstone. Zambia is one of five bidders looking to bring home the 2019 AFCON - Guinea, Ivory Coast, Algeria and Cameroon (DRC withdrew their bid). The CAF executive will decide on the hosts for 2019 as well as 2021 in September 2014 at a meeting in Cairo.
The average overnight interbank rate has dropped by 900 basis points from a year-to-date high of 25.1% on June 27 since the Bank of Zambia started implementing Open Market Operations (OMOs) last week. The overnight interbank rate is the rate at which banks lend to one another on a short-term basis. The rate was at 15.96% today:
Government set to release $600m VAT refund to affected miners
According to a report by the Daily Mail newspaper on Wednesday, the government will start releasing the $600m in VAT refunds which has been withheld from mining companies which were failing to provide import certificates from destination countries where Zambian copper was being exported. The paper quoted the Minister of Mines who had said that some mining companies had stated complying with the requirement subsequent to which the Zambia Revenue Authority was instructed to begin working on repayment of the funds.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *