Zambia will propose a debt swap with China from US dollars to Chinese yuan when government officials visit that country at the end of this month, Finance Minister Margaret Mwanakatwe has revealed.

Speaking during a press briefing in Lusaka, Wednesday, Mwanakatwe explained that the rationale made sense in view of the need to mitigate the exchange rate exposure between Zambia’s kwacha and the US dollar, and the large trade volumes between the two countries.

Whenever the kwacha depreciates against major currency convertibles, the country’s external debt position is adversely affected meaning the debt amount increases.

At the current exchange rate, one Chinese yuan, otherwise commonly referred to as the Renminbi, is equivalent to around K1.79, compared to K12.00 per dollar.

“…Ourselves, as a country, our largest importation comes from China. So, it makes sense to look at ways and means as to how we can take advantage of this kwacha-yuan position. We have borrowed from China, we’ve borrowed in dollars. So, our intention is to actually swap the dollar into yuan, or Renminbi as you may wish to call it, so that we can try and mitigate, somewhat, the exposure to the dollar and the movements of the dollar,” Mwanakatwe told journalists at the Ministry of Finance.

She, however, hastened to add that official bilateral discussions between Zambia and China had not commenced on the proposed debt swap.

“Let me say that, again, we have not begun those discussions. This is a thought that is going on amongst ourselves as a Ministry, together with the central bank, so we can see how we can best utilise what we have as import-export, and how we can how come up with a swap that will mitigate some of the dollar exposure that we have, and, as such, put less pressure on our reserve requirements for dollar and be able to boost our reserves,” explained Mwanakatwe.

Zambia’s gross international reserves by the end of the fourth quarter of last year plummeted to US $1.57 billion, the lowest in the last nine years, from a high of around US $3.1 billion in 2014.