By BUUMBA CHIMBULU
GOVERNMENT will need to be transparent in sourcing about US$700 million required to boost international reserves to 2.5 months of import cover, Bankers Association of Zambia (BAZ) Chief Executive Officer, Leonard Mwanza, has said.
Finance Minister, Bwalya Ng’andu has proposed in the 2020 National Budget to boost the international reserves from the current $.4 billion.
Mr Mwanza said Government would require about US$700 million to increase international reserves to 2.5 months of import cover from the current 1.7 months.
He stressed that the process required a transparent process of how the nearly US$700 million would be sourced to beef up the reserves, assuming the current reserves were at US$1.4 billion.
Mr Mwanza said closely aligned with the high debt situation was the dwindling stock of foreign currency reserves currently standing at 1.7 months of import cover.
He was speaking yeaterday in Lusaka when he appeared before the Expanded Parliamentary Committee on Budget and Estimates.
“The $700 million is computed from Government pronouncements that they would like to increase the reserves to 2.5 months of import cover from 1.7 months of import cover, that increase is actually 50 per cent, so the current reserves sit at about $1.4 billion.
“If you add 50 percent to that you will need another US$700 million to reach the target by Government,” Mr Mwanza said.
Foreign reserves, he said, were an important measure of stability especially when it came to balance of payments and the ability of the Government to meet its interest payments on external debt.
Mr Mwanza said while appreciating the proposed increase to 2.5 months of import cover, the ideal scenario was to maintain an import cover of above 3.0 percent.
He also said the move by Government to reduce the arrears stock by K2.3 billion and halt the accumulation of new debt would bring life to struggling businesses.
Mr Mwanza said this relief would however, only make impactful strides if liquidity was provided early in the year so that businesses were given the opportunity to recycle this liquidity throughout the year.
He said it was also the expectation of the association that those businesses who obtained credit from banks would square their positions and create more credit opportunities.
“We however, do maintain that the stock of arrears excluding Value Added Tax refunds amounting to K20.2 billion is huge and denying the economy the opportunity to grow,” Mr Mwanza said.