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Alba Iulia
Tuesday, January 28, 2020

Zambia may have difficulties to repay Euro-bonds-report

Headlines Zambia may have difficulties to repay Euro-bonds-report

FILE: Then Finance Deputy Minister Miles Sampa launching Zambia’s US$750million-worth bond at  Deutsche Bank’s Fixed Income Trading Floor on Wall Street in New York, USA, on Thursday 13 September, 2012. This was after his telephone call with Finance Minister Alexander Chikwanda, who endorsed the transaction.  photo by  Chibaula D. Silwamba GRZ
FILE: Then Finance Deputy Minister Miles Sampa launching Zambia’s US$750million-worth bond at Deutsche Bank’s Fixed Income Trading Floor on Wall Street in New York, USA, on Thursday 13 September, 2012. This was after his telephone call with Finance Minister Alexander Chikwanda, who endorsed the transaction. photo by Chibaula D. Silwamba GRZ

A cautionary tale of Zambia’s international sovereign bond issuance report shows that the country may experience difficulties in repaying the face values of Euro-bond at maturity.

The report states that this will be so if the money is either not spent on activities with high economic returns or if there are adverse changes in exchange rate or international market conditions.

The Zambian government has since 2012 issued two ten-year sovereign bonds amounting to US$ 1.75 billion to mainly finance infrastructure projects in transport, energy and health sectors.

The report contends that despite the high interest payments of over US$125 million annually, the bullet structure of the two bonds may have significant repayment risks as the country was expected to pay out the US$1.75 billion within a two-year period between 20th September 2022 and 14th April 2024.

The report, which has been produced by the Zambia Institute for Policy Analysis and Research (ZIPAR), was launched in Lusaka today by Ministry of Finance Permanent Secretary in charge of Budget and Economic Affairs Pamela Kabamba.

Mrs. Kabamba said government was willing to work with various stakeholders to ensure that risks that may arise from the issuance of the two sovereign Euro-bonds were minimised and that the credibility and integrity of Zambia is upheld.

She acknowledged that even though the two Euro-bonds were successfully issued on the international capital market, Zambia was still on the learning curve from concessional and non-concessional borrowing to a more market based financing.

And ZIPAR Executive Director Pamela Kabaso stressed that the bonds were not without risks as they increase the country’s external debts and require strict fiscal management to ensure that the government is able to repay the loans.

Dr. Kabaso noted that the report, which was launched today, looks at how Euro-bond risks can be managed and what Zambia needs to do to ensure it does not default on the loans.

She said defaulting could be highly detrimental to the economy.

The report has recommended that government should consider setting up a joint fund for the two Euro-bonds to insulate against future adverse macroeconomic conditions.

The two bonds were issued in 2012 and 2014 respectively and amounted to 37 per cent of Zambia’s external debt in 2014.

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    • Sampa used some of the money personally, how can it be repaid? (Sampa about to sue me for slander)

    • We told these PF idoits not to contract debt without putting measures that will increase income generation . Some of us who dislike PF with passion knew the eventuality of PF ‘s borrowing the moment it borrowed the money. We also predicted the decimation of Zambia’s credit rating or worthiness. And here we are now with PF falling to convince the potential funders what the money was used for and where the money to repay the debt will come from.

      HH warned them and gave them timely advice they called him bitter all because they knew that once the money comes they would share it while convincing themselves that fikaisova kutanshi.

      Well nafitampa ukuyisova nomba. Zambia ‘s credit rating, negative, Civil servants salaries delayed, Zambia unable to borrow even on harsh terms, Kwacha…

  1. Honestly how does PF steal a wounded patient from the hospital? I think Zambia will be a wise country after civil war because people have stopped thinking.they will only know the value of peace after civil war.

    • Iwe Ganja, who has stolen the man, plz don’t tell such horrible lies and don’t advocate for a war which you can’t handle. Just fight with the ballot not resort to the gun, that’s a cowardly act and no one will allow you to do such a terrible thing

  2. Will probably have to defer the repayment or restructure the debt. Going by the way these chaps are living, luxuriously. After massively reducing projected revenue, the government continues going by the same budget, nimasobela aya.

  3. Ati ” Zambia was still on the learning curve from concessional and non-concessional borrowing to a more market based financing.”

    About ten years ago we had debt relief whilst vulture funders were hovering and somebody can say the above. Africans we forget so fast…

    • Much as she knows her stuff, she is being cautious and can’t afford to be seen to be eccentric in her utterances. She is being polite but deep down she knows problems lie ahead when the debt is due. We never learn as a country! Good to hear from you though, Permsec Kabamba.

  4. Mrs. Kabamba and her team already know whether the euro-bond funds were spent on activities with high economic returns. I don’t see any returns from funds wasted in Zambia Railways and such similar poor performing companies. We all know that there has been adverse changes in the exchange rate. We also know that as the developed economies overcome their economic challenges emerging markets will be less attractive! The risk of default is very high unless taxes are increased and/or some social services are not provided as expected! Unfortunately by 2024, the people responsible may not be there!

    • @Kasonde, you are very right. These things are not rocket science. Default is imminent! I also don’t see returns from Zambia Railways! To avoid default and preserve our international integrity we should brace ourselves for higher taxes and/or declined provision of social services as we approach 2022.

    • @kasonde, you are spot on. The Euro-bond excitement is now over. The Transaction Advisors got their huge fees and moved on to other transactions. Reality is now dawning on Zambians about the fact that NKONGOLE NI NKONGOLE. Interest and principle must be repaid! But repayment is only easy if the NKONGOLE is used properly! We will see!

  5. Why on earth have such a party in power.At this point even FDD or NAREP wouldnt be thia bad and evil to our beloved nation

  6. He who does not learn from advice must learn from experience.Its like this line works for almost everything in Zambia.


    • Let them continue so that these useless poor bembas will eat tribalism an their lungu ..who told u mutonga niojama bachimbwi imwe?

  8. My last comment ever as I watch from the slide lines;

    Is it a bundle or bullet or strip If yes look at the yield to maturity profile of similar bonds in the sovereign and corporate category and match the exposure appropriately with secondary activity becoming blared

    Look at the nature of your Repayment and look at it like this and see the effects long-term

    NetWorth = NFA + FA* + TTL – HPM – GovtBonds – OtherLiabilities

    As you support Gov. Debt, spending and Control where you Can especially in low quality earnings for reinvestments of incomes from bonds invested to meet those repayments at maturity

    Remember you relying on securities to spend in deficit see

  9. Everyone should stop and wait for a second. If the PF couldn’t manage a bus station… then why did they get a 1 billion Eurobond loan? On good faith?

    These debts are not meant to be paid off. When anyone pays them off, the flow of profit to the bank stops. They are intended NOT to be paid off, instead to be rescheduled, at higher interest, and possibly higher face value. At the expense of handing over even more natural resources.

    And this is not peculiar to Zambia. Continued…

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