ZAMBIA FINALIZES GUIDELINES AND LISTING RULES FOR ISSUANCE OF GREEN BONDS
Secretary to the Treasury FELIX NKULUKUSA says Zambia has finalized the guidelines and listing rules for issuance of green bonds to support climate related projects. Mr. NKULUKUSA says the finalization of regulations creates credible opportunities for raising financing through green bonds for climate change projects and green growth.
“To promote green bond trading, we have provided tax exemption on withholding tax on interest income earned on green bonds with a maturity of at least three years. We are also in the process of developing legislation to regulate the carbon market,” he said while addressing the United Nations Conference on Trade and Development (UNCTAD) forum on financing for recovery and development in an era of interrelated global crises (Covid-19, Climate Change & Russia-Ukraine Conflict), in Geneva, Switzerland.
Furthermore, the Secretary to the Treasury said the November 20, 2022, breakthrough-agreement by the United Nations Climate Change Conference COP27 for providing loss and damage funding for countries hit hard by climate disasters, like Zambia, will be an important source of financing for recovery and development.
The Covid-19 Pandemic was among the issues highlighted as a challenge to global development – which Mr. NKULUKUSA said not only resulted in loss of human life but also had a significantly negative impact on growth and revenue collection, and exposed the vulnerabilities of developing countries both in terms of capacity to cope with the Pandemic and ability to respond. The Secretary to the Treasury informed delegates in Geneva that in Zambia, approximately 3,500 lives have been lost due to the Covid-19 pandemic.
“The pandemic compromised our country’s revenue generation capacity while public expenditure rose in response to Covid-19 related challenges. Tax relief to enable economic players endure the Pandemic further deepened the country’s fiscal challenges – which already were eminent prior to the Pandemic,” stated Mr. Nkulukusa as he took the chance to express gratitude to Zambia’s multilateral and bilateral partners for augmenting Covid-19 mitigation efforts.
While Zambia seems to be overcoming the Covid-19 Pandemic, the phenomenon of climate change has become even more evident – despite the country not being a major polluter. Rising temperatures, frequent droughts and flash floods – whose impact on the agriculture sector calls for change of agricultural practices – are more frequent hence the need for more financing and research in climate variability to inform appropriate policy interventions in the sector.
He told the Geneva gathering that flash floods experienced in some areas of Zambia have negatively affected output in some open-pit mines which were induced to make climate change mitigation investments to pump out water from the flooded mines, before production could resume, thereby suffering a higher cost of doing business. In recognition of the significance of climate change and its impact, Zambia has prioritized the issue in the 8th National Development Plan.
“We have already seen the important role that agricultural insurance has begun to play in mitigating against agriculture losses occasioned by droughts or floods,” Mr. Nkulukusa briefed the Forum and told delegates that disaster risk financing under the African Risk Capacity, supported by the African Development Bank and other cooperating partners such as Switzerland and Canada, is another important financing source that is assisting in mitigating the impact of climate change on the most vulnerable.
The Russia-Ukraine Conflict has also negatively impacted developing countries such as Zambia through rising global petroleum prices, particularly in the first half of 2022, leading to higher domestic petroleum pump prices at the time when the country embarked on petroleum reforms through which fuel subsidies were removed as part of the response to the debt crisis, he said.
Mr. NKULUKUSA indicated that all these global crises happened at the time when the country is in a debt crisis. Following the IMF’s approval for an Extended Credit Facility in August, 2022, the country is now in the process of seeking debt restructuring.
We have commenced engagements with creditors to conclude debt restructuring which will result in manageable debt repayment profiles. Successful debt restructuring will create fiscal space to enable the country to provide support to developmental and social sector programmes. This is a complex undertaking, as such, international support is required to achieve successful debt restructuring.
“In terms of the next key steps, we are looking forward to signing a Memorandum of Understanding with the Official Creditors by the first quarter of 2023,” Mr. Nkulukusa announced, and added that Zambia is also engaging in parallel discussions with the private creditors, mainly focusing on the outcome of the Debt Sustainability Analysis (DSA) and the kind of relief that Zambia requires from its creditors based on the DSA.