Zambia currency hit by Glencore woes

LUSAKA/LONDON: Zambia’s kwacha went into freefall on Monday, hit by a worsening outlook for key export copper as the metal’s price hit a one-month low, amid fears that mining giant Glencore might further rein in its extensive operations in the country.
The currency fell more than 17 percent, its biggest one-day fall on record, with a rating downgrade by credit agency Moody’s that the government criticized as unsolicited also weighing.
“We have a double-whammy happening, meaning copper prices continue to soften, and production targets are really at risk because of the Glencore news,” said Kevin Daly, portfolio manager at Aberdeen Asset Management in London.
Glencore’s Mopani Copper Mines is the second largest employer in Zambia after the government, but fears over the mining and trading company’s ability to withstand a prolonged fall in metals prices sent its shares tumbling 25 percent on Monday.
Moody’s, which cut its sovereign rating to B2 from B1 on Friday, said it expected Zambia’s fiscal and debt positions to worsen, and Daly said on Monday the country might now have “little choice but to turn to the IMF.”
The International Monetary Fund said in May the economy risked being hit by large fiscal imbalances, lower copper prices and policy uncertainties, and Finance Minister Alexander Chikwanda told Reuters this month it was likely to grow less than 5 percent this year.
The kwacha fell to as low as 12.69 to the dollar at around 1225 GMT on Monday before recovering slightly to 12.54, still down 16 percent.
Zambian policymakers did not immediately comment on the kwacha’s slide.