The Policy Monitoring and Research Centre – PMRC has weighed in and given further details of the use and allocation of the K8 billion COVID 19 bond.
Zambia’s cabinet, the highest decision making organ of the executive arm of government recently approved the establishment of an economic stimulus package that would be financed through the issuance of a K8 billion COVID-19 bond.
PMRC Executive Director Bernadette Deka-Zulu in a statement availed to the Zambian Business Times – ZBT stated that about K3.2 billion of the COVID-19 Bond will be allocated to the Presidential COVID-19 Economic Recovery Fund.
Payment to third-parties (Micro Finance Institutions) will get about K1.3 billion, Drugs Debts and Medical Equipment Procurement will get an allocation of K1 billion, Grain Purchases have been allocated K1.7 billion while other applications K800 million.
Deka-Zulu further stated that raising the K8 billion bond will be done in multiple tranches. The Bank of Zambia is the issuing authority of the Bond on behalf of the Government and this Bond has the same features as regular bonds that the Bank of Zambia issues.
The initial indication was that the entire K8 billion covid 19 bond proceeds were to be used to dismantle domestic arrears and inject liquidity in the market that has been weighed down by partial and in some sectors, full restrictions of business activity.
The clearing of drugs and medical equipment debts is one area that has seen the increase in domestic arrears but this field will most likely result in funds being paid of out the Zambian economy. Most drugs, medicines and medical supplies are imported or simply assembled in the country with low local content.
As for grain purchases, this is dominated by mostly local small scale and emerging commercial farmers. This is perhaps one of the key areas that should see more liquidity flowing into the domestic market and local economy.
