Zambia’s US$1 billion bond and the US$750 million bond are performing well, making them the best priced bonds amongst African Sovereigns.
In a statement released to the media by Ministry of Finance Public Relations Officer, Chileshe Kandeta, Government said that conditions in the International Capital Market are tapering the performance of Zambia’s two Sovereign Bonds.
According to a market assessment for May/June, Zambia’s US$1 billion bond which matures in 2024 is trading at 107.13 percent. This makes it one of the best priced bonds amongst African Sovereigns.
As at 16th June, 2015, the yield rate for the US$750 million bond stood at 6.97 percent. On the other hand, the US$1 billion bond yield rate was a much improved 7.38 percent compared to 8.625 percent at issuance in April, 2014.
” This trend is within an acceptable trajectory and also signifies the robustness of Zambia’s economic transformation program, ” read the statement.
” It also manifests the steadfastness of the confidence that international investors have in the consistency, predictability and direction of our policies towards socio-economic stability, ” concluded the statement.
Yesterday, Finance Minister Alexander Chikwanda said Zambia will return to the international capital market for fresh borrowing following the widened budget deficit in the first six months of the year which has risen to K 20 billion accounting for 18.5 percent of the GDP.
Mr Chikwanda told Journalists in Lusaka Wednesday afternoon that Zambia is definitely issuing a third Eurobond in four years but refused to confirm that the country will seek to borrow as much as $ 2 billion.
The Zambian government has raised $1.75 billion in two separate Euro bonds since 2012.
And Open Society Foundation is dismayed with what it has described as government’s insatiable appetite for borrowing.
Executive Obbious Chikombola says his organisation is left wondering as to whether the answer to the country’s fiscal quagmire rests entirely on the backbone of borrowing.
Mr Chisala says the effects of gross borrowing are not new to Zambia, stating that it was a s a result of borrowing that the mines were sold for a song due to pressure from the International Monetary Fund and international lenders.
He adds that it was due to this high gearing ratio that Structural adjustment programs were imposed on Zambia which in turn exacerbated the poverty rate in the towns and cities.
Mr Chisala says Open Society Foundation Challenges the government to tell the people of Zambia how they have used the $1.750 Billion Eurobond before they contract the $2 billion euro bond.
He notes that borrowing is no bad provided the money borrowed is channelled towards infrastructure development and capital projects such in the transport and energy sectors.
Mr Chisala says the concern is that $2 billion Eurobond issuance is being planned in response to the looming budget deficit of K20 billion.
He says the country Cannot afford to borrow for consumption, and has since challenges government what expenditure constitutes the K20 billion deficit.
Mr Chisala says his organisation will support the government only when they provide a detailed analysis of the expenditure to which they intend to channel the said Eurobond money.