BOZ Buys Gold From Mines

The Bank of Zambia (BoZ) plans to buy gold from mines in the country in a bid to boost its foreign reserves.

Having signed an agreement with First Quantum Minerals, BoZ will buy the gold that is produced as a by-product of the Kansanshi copper mine. The BoZ has also signed an agreement to buy gold from the state mining investment firm ZCCM-IH.

The move is part of efforts to address Zambia’s financial standing after the sovereign debt default last month. Past gold reserves have been depleted as a result of severe foreign exchange liquidity challenges.

“During periods of market stress - when assets would be losing value - gold would be adding value, thereby shielding the whole portfolio from large losses,” Bank of Zambia Governor Christopher Mvunga has explained.

The recent default came as a result of a missed payment worth $42.5 million on one of the Eurobonds in October. The subsequent 30-day grace period came to an end on Friday 13th November.

The government owes $3bn in Eurobonds alone and previously asked bondholders for a relief period on interest payments until April 2021. Committee members hold more than 40% of Zambia’s outstanding Eurobonds. In total Zambia owes international creditors an estimated $12bn.

In the run up to the default bondholders held back on agreement, with analysts citing transparency concerns as a major obstacle to moving forward. Concerns and uncertainty regarding the Government’s handling of Chinese loans were an important factor. More than $3bn has been borrowed from Chinese lenders including China Exim Bank and the China Development Bank.

In October bondholders demanded answers over an apparent ‘ghost loan’ of over half a billion US dollars taken out by the PF government between December 2019 and January 2020.