Answer to Question #281349 in Finance for Douglas

Question

On 3rd December,2021, the new Dawn government and the IMF mission to Zambia reached a staff level agreement on a programme under the IMF's Extended Credit Facility (ECF) that envisages provision of financial support of $1.4bn over the next three (3) years. Taking into account the anticipated IMF conditionalities, What implications will such an agreement have on the general economy outlook of Zambia? To what extent do you approve or disapprove such an agreement.

Answer 1

The announcement of the Staff Level Agreement has led to the oversubscription in bond issuance powered by inflows from non-resident investors making purchases of Government securities, subsequently leading to an improvement in the availability of foreign exchange. Secondly investors and other persons holding on to dollars and other tradable currencies have begun to offload tradable currencies onto the market to buy the kwacha in anticipation of further appreciation of the kwacha against the dollar and other currencies.