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Zambia’s stock of private sector foreign liabilities has increased by about five percent to US$21.4 billion in 2021, according to latest survey.
This is due to significant valuation charges to the Foreign Direct Investment (FDI) stock, mostly held by enterprises in the mining sector.
This is according the latest survey results of Foreign Private Investment and Investor Perception in Zambia conducted by the Bank of Zambia (BoZ).
Central Bank Governor Danny Kalyalya indicated on Thursday that the FDI continued to account for the largest share of the stock of private sector foreign liabilities at just 80 percent.
Kalyalya noted that the recent experience showed that FDI flows were affected by the adverse effects of COVID-19 pandemic.
He also noted that adverse investor sentiments from the fall-out of the Russia-Ukraine conflict may weigh on FDI flows in the near-term.
In 2021, Kalyalya pointed out that global FDI flows recovered strongly to pre-pandemic levels, rising by 64.0 percent to about US$1.6 trillion.
However, Africa accounted for a small proportion, US$83.0 billion or 5.2 percent, of total global FDI flows in 2021.
Stimulus packages in major economies, growth in international project finance, on account of loose financing conditions as well as mergers and acquisitions were the key drivers behind the rebound in FDI flows.
In terms of flows, net foreign liability outflows increased to US$345.8 million in 2021 from US$45.4 million in 2020.
This is attributed to loan repayments, mainly among enterprises in the mining sector as well as debt repayments to non-affiliated enterprises in the Information Communication Technology (ICT) and electricity sectors.
Turning to FDI, liability outflows amounted to US$122.1 million in 2021. This is in sharp contrast to the net inflow of US$245.2 million recorded in 2020.
“Higher debt repayments by the mining sector, more than offset the rise in retained earnings recorded in the mining, deposit-taking corporations, manufacturing as well as information and communication sectors,” Kalyalya said.
This accounted for net FDI liability outflows in 2021 and Canada remained the major source of FDI liabilities.
The stock of private sector foreign liabilities, however, declined by 11.7 percent to US$18.9 billion during the first half of 2022 due to losses in the mining sector.
Another major finding from the Survey is that the stock of private sector foreign assets increased by about 17 percent to US$4.0 billion in 2021, largely reflecting an increase in trade receivables.
Asset flows hardly increased, to US$721.7 million in 2021 from the US$721.4million in 2020, due to trade receivables to some companies in the mining sector from non-related parties and loan repayments to entities in the sector from related parties.
FDI asset flows fell by US$254.3 million in 2021 from the net acquisition of US$64.0 million registered in 2020, as a result of loan repayments by affiliates to entities in the mining sector.
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The United Kingdom dominated FDI asset withdrawals while Canada held most of the asset stock.
“I must mention that the data we collect is extremely important as it generates information that enables us to understand developments in the external sector that have implications on the formulation of sound monetary, fiscal, trade, and investment policies.
“Further, the various policy interventions aimed at improving the ease of doing business in Zambia, specifically debt and reserves management, investment promotion, and overall economic planning rely on good quality data,” Kalyalya said.
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