Saturday, October 25, 2008

Foreign investors withdraw $56 million from securities

Foreign investors withdraw $56 million from securities
Saturday, October 25, 2008 10:15:06 PM

FOREIGN portfolio investors have this month withdrawn about US$56 million from the government and private securities causing a sharp depreciation of the kwacha, Bank of Zambia (BoZ) governor Dr Caleb Fundanga has disclosed.

And Secretary to the Treasury Evans Chibiliti has revealed that the recent reduction in fuel prices will result in revenue loss of about K96 billion, the money he said the government would recover by freezing funding to less priority areas on the expenditure side of the budget.

The two officials also told journalists during a joint press briefing on Wednesday that the country might not achieve its targeted seven per cent inflation rate while the growth rate target for this year has been lowered to six from of seven per cent mainly because of external shocks resulting from the current international financial crisis.

Dr Fundanga explained that the local currency had gone through very difficult times this year which have been characterised by late president Levy Mwanawasa’s illness, his eventual death and current political uncertainty in the country owing to the forthcoming presidential election.

The BoZ chief also said the kwacha has tumbled on account of the global financial crisis, which has been felt on the domestic economy through the fall on copper prices as well as flight of portfolio investors.

The local currency has depreciated to trading levels of around K4,300 against the US dollar while copper prices have declined to around US $4,600 per tonne on the metals markets.

“This has not yet been good year…in fact, we have noticed that this month, which has been the most difficult, about US$56 million net has gone out to these portfolio investors whereas in normal month, it used to be plus or minus US$5 million because sometimes they bring in money or take it out,” Dr Fundanga said.

On whether the country would achieve its targeted single digit annual inflation rate for this year, Dr Fundanga said: “Clearly, that objective is very difficult now because we only have November and December remaining. However, its possible that we can, at least, chip off some and still remain with a decent number…it may not be seven per cent…let’s continue working hard.”

And Chibiliti said the Treasury was working out a modality of recovering the revenue loss from some of the recently announced unbudgeted revenue loses through subsidies and fuel tax cuts without borrowing from the market or printing some more notes.

He, however, said the decisions would result in the country’s fiscal deficit to shoot beyond the projected 1.2 per cent.

“The revenue loss is about K96 billion and what that means is that we must reduce expenditure by K96 billion,” Chibiliti said. “If you are going to continue to pursue sound economic management principles, then all the time when revenue is given up, then expenditure must be slashed.”

On the projected seven per cent economic growth rate for this year, Chibiliti expressed confident that basic fundamentals which have been driving the growth in the economy would remain sound.

“We need to be conservative…we need to acknowledge the exchange rate is appreciating, inflation has seen an upsurge. We must acknowledge these impacts,” said Chibiliti. “Even if we are to miss the target of seven per cent, it will not be much…preliminary estimates are that we will be on track to grow by around 6 per cent…”

Labels: , ,


Post a Comment

Subscribe to Post Comments [Atom]

<< Home