Zambia’s Kwacha Weakens to Record After Lungu Seeks Treatment

Zambia’s kwacha weakened to a record low, extending the biggest decline among African currencies this year, as President Edgar Lungu sought medical treatment less than two months after coming into office.

The currency of the continent’s second-largest copper producer retreated for a fifth day as yields on the southern African nation’s $1 billion of bonds due April 2024 jumped the most in two months. The dollar gained against most emerging-market currencies as speculation grew that the Federal Reserve is moving closer to raising interest rates.

Lungu, 58, won presidential elections in January by 28,000 votes following the death of his predecessor in October. He left Lusaka, the capital, for specialist treatment in South Africa on Tuesday, state-owned ZNBC reported. The president’s collapse on March 8 was caused by low blood sugar levels stemming from a rare stomach complaint, according to his office.

“It’s a combination of the stronger dollar and the uncertainty around the health of the president,” Ridle Markus, an Africa strategist at Barclays Africa Group Ltd., said by phone from Johannesburg. “The second one is probably a more of an overriding factor.”

The kwacha dropped as much as 2.4 percent to 7.2723 per dollar before paring losses to trade at 7.2422 as of 3:21 p.m. in Lusaka. The currency has declined 12 percent this year, the most among 24 African currencies. Yields on Zambian dollar bonds climbed 23 basis points, the most since Jan. 6, to 7.49 percent.

Oil Refinery

“Zambian financial markets –- and the kwacha exchange rate in particular –- have received a beating in recent sessions as negative sentiment pertaining to the president’s health and the oil refinery shutdown exacerbated the thin dollar liquidity conditions,” said Irmgard Erasmus, a fixed-income analyst at NKC Independent Economists in Paarl, South Africa.

Queues at fuel stations in Lusaka have lengthened since March 9 as many pumps ran dry. Indeni refinery, the country’s only oil processing plant, halted operations Tuesday after running out of crude feedstock, Christopher Yaluma, minister of mines energy and water development told lawmakers. The shortage of refined fuel was “artificial” and caused by panic buying as Zambia had ample supplies of gasoline and diesel, he said.

Zambian markets were closed for a holiday on March 9, the day after Lungu collapsed at a stadium where people were celebrating International Women’s Day. The president said in remarks broadcast Tuesday on Lusaka-based Radio Phoenix that he was “feeling much better.”

Tax Standoff

The country is set to resume talks with the International Monetary Fund this month as Zambia’s government struggles to narrow a fiscal deficit exacerbated by an almost 8 percent decline in the price of copper this year.

Lungu is trying to prevent mine closures or retrenchments as he faces a standoff with companies over a new tax system. Copper accounts for more than 70 percent of Zambia’s export earnings. The Democratic Republic of Congo is the continent’s biggest producer of the metal.

Lungu established a technical committee to end the dispute over the higher mineral royalties Finance Minister Alexander Chikwanda implemented in January. The team will make recommendations by the end of March, said Amos Chanda, Lungu’s spokesman.

The IMF talks starting March 19 will be “to review recent developments and discuss the outlook and economic policy plans with the authorities,” Tobias Rasmussen, the fund’s country representative, said in reply to e-mailed questions. He didn’t say whether the possibility of Zambia entering an IMF program will be discussed.

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