The Zambian Government has begun marketing an 11-year average life US dollar-denominated benchmark-sized Eurobond at 9.5% area.The bond will have three equal redemption payments in July 2025, 2026 and 2027.
The order book is open and the deal is expected to be today’s business.Barclays and Deutsche Bank are running the 144A/Reg S transaction.Zambia is rated B by Standard & Poor’s and Fitch.
And State House Spokesman Amos Chanda has confirmed that Zambia will issue a 10-year Eurobond of as much as $2 billion today to fund a widening budget deficit.
“We expect the Eurobond to be issued today. It will be between $1.5 billion and $2 billion and the maturing date is 10 years,”, a spokesman for President Edgar Lungu, told Reuters.
Zambia’s budget deficit is expected to swell to 20 billion kwacha ($2.64 billion) by the end of 2015 from an initial forecast of 8.5 billion kwacha.
This will be the third Eurobond issued by Africa’s No.2 copper producer. Its previous forays into the international capital markets were a debut $750 million bond in 2012 and a $1 billion bond last year.
African governments have taken advantage of rock-bottom borrowing costs and investors’ hunger for yield in recent years, with foreign debt issuance rising from $67 million in 2008 to more than $8 billion last year, according to Thomson Reuters data.
Zambia has stated a preference for external borrowing rather than domestic because it was cheaper, but with the U.S. Federal Reserve looking likely to raise interests by the end of the year the costs of servicing debt will rise.
Zambia’s external debt currently stands at $4.8 billion, about 18.5 percent of gross domestic product. Its domestic debt burden is $3.7 billion, about 14.2 percent of GDP.
Guess people who voted for PF are happy now . In 4 years under PF government borrowed $6.5 billion. We’re is own country going now ? Lungu can’t say anything about the economy but just borrowing. Why can’t he just stay down for now .
Makes the Greek debt seem like a Sunday afternoon picnic…
The words used in this article are too technical to be understood by the general public. That’s why people end up commenting contrary.
I personally can’t comprehend the whole thing, it’s outside the scope of my profession.
LT try to simplify technical terms to a lay-man’s level of understanding. That’s what we call effective communication.
So PF’s way of developing the nation is borrow, borrow, borrow, spend, spend, spend? LOL, SMH, that is it? With all the economists about, this is the best we can do? What a sham of a government. BUUUURRrrrssst coming soon Zambia, brace yourselves. There is no such a thing as free lunch, you will pay for this in blood and tears, mark my words!
@ hope for better, dont worry about the explanation the picture LT has used pretty much sums it up we are carrying a heavy load for the next 20 years
Sad indeed. This is what is expected when you for people into leadership using sympathy and not God given brains.
Sad indeed. This is what is expected when you vote for people into leadership using sympathy and not God given brains.
God help us. Borrowing to fund budget deficits is not sustainable as Greece and the euro zone just confirmed this. PF zwaa!
Any educated people in government ? Leading a country to collapse. All the level of thinking is really low .
Mr president please step DOWN not everyone can be a leader
Very true indeed, with the best will in the world sometimes as a human you have to accept that you have come up short to the challenge. An American General once said, fail if you have to & accept that you have tried and come up short in dignity and with God’s help step away but as you do remember there is honour in the effort! Ba Lungu, we appreciate your intentions and effort but it has to be clear now Alungu, you have come up short. Please step away now, there is honour in the effort!
Zambia is no longer a safe place to be. Pf twanaka!!!!!!
LATE PRESIDENT MWANAWASA CAME UP WITH AN IDEA OF “TIGHTEN UP YOUR BELTS GUYS” TO FINISH UP THE DEBTS AND DEVELOPED THE COUNTRY, LEFT $2B IN THE RESERVE BANK FOR DEVELOPMENT. THE PF HAVE COME WITH ” WAGE FREES, NO EMPLOYMENT FOR THREE YEARS IN ODER TO DEVELOPE WHEN THERE ARE SHODDY WORKS ALL OVER UNFINISHED PROJECTS.
PF IS PUTTING US ORDINARY CITIZENS INTO POVERTY. GREEKS ARE FOUND TO BE WISE GUYS AND IN FACT GREAT PHYLOSOPHERS ARE GREEKS BUT TODAY THEIR WISDOM IS GONE. WHAT ABOUT WE POOR COUNTRY WERE WILL WE BE?
That is the only way Sata’s projects can be completed. Else will be voted out
And when you are re~elected then what?
The demise of dreams – http://www.lusakatimes.com/2007/01/21/zambia-launches-15-bn-economic-plan/
LPM turning in his grave, 7 bn US$ maturing in the next 10 years if not earlier – damn pfools !
The bond buyers should be ready for a haircut, or scalping, or even an ISIS style beheading when these bonds are due for repayment. These bonds will never be repaid and Zambia will revert to its economic pariah status that she was in during the last 15 years of KK and UNIP.
With the best will in the world sometimes as a human you have to accept that you have come up short to the challenge. An American General once said, fail if you have to & accept that you have tried and come up short in dignity and with God’s help step away but as you do remember there is honour in the effort! Ba Lungu, we appreciate your intentions and effort but it has to be clear now Alungu, you have come up short. Please step away now, there is honour in the effort!
Fyalungula ….. God help our nation.
In all truth and honesty, this is little money when one considers the richness of our country. Instead of delaying development each year, its imperative that we borrow now and use the funds to develop our country.
If America can borrow trillions of dollars which they will never pay back, why cant Zambia do the same? After all, when the world economy bounces back as focused in a year or so, this same money would have done great things.
Which country on planet earth has no debt? When we say the so called “economists” have failed Zambians you scream and yell.
Two billion dollars to be repaid in ten years for the good of the country is nothing, We are basically borrowing 200m dollars per year and this is nothing considering that we a potentially rich country.
Viva PF!!!!!!!!!!!
@Daniel Munkombwe all you said was logical until you said viva PF. There is nothing wrong in borrowing to invest and invest properly but if the borrowing we are doing is paying for SHODDY infrastructure which was NOT even planned,then we have reasons to get worried! If borrowing is meant to build cronyism and corruption then we have to get worried!! If we are borrowing to build the most expensive roads in the world not because of the best quality but because of corruption,then we must get worried. We are borrowing to invest in infrastructure where Public-Private Parternerships would have worked better then we are trouble. If we are borrowing to fund a bloated government and under performing public service (in some cases) then we are in trouble. We seem to borrow to do exactly these!
So, Mr. Viva PF, how will you generate the monies to repay this amount when this money is being used in non-revenue generating activities? Could you point out one project that your government is undertaking where we have expected consistent returns to service these loans? It is madness to compare a world power like America to Zambia. They borrow trillions because they are much bigger than us and who lied to you that America will never pay back these loans?? They service these loans but the only difference is the American government knows how to prudently use these borrowed monies because they have brains. PF does not have any brains. OK?
It’s Xmas come early for these empty tins…there is completely nothing to celebrate here as you know what happens when you give a man without a plan or commonsense a ward of money!!
More infraSTRUCTURE
So when we cannot pay back the loan, can we also apply to leave the African Union and the UN?
Mr. Viva PF, we are not against borrowing. Even your employer technically borrows from you by paying monthly for a job you perform every working day. It is the rate at which external debt is growing the purpose of borrowing that is a concern.
The rate of borrowing: Simple rule of thumb in basic finance: If your debt is growing faster than you ability to pay (income) your situation is unsustainable and you are heading for trouble – ask Greece, Argentina or Magande. Fact: Zambia’s external debt will grow faster than its GDP.
Purpose of borrowing: The reason we are on hole is because your PF does not have the courage to raise tax on worker (recall the more money thing) and the mines (protected by Lungu). Also, you have increased spending and wages chew the bulk of the budget.
Zambia’s budget deficit is expected to swell to 20 billion kwacha ($2.64 billion) by the end of 2015.
The amount being raised is less than the projected deficit. What is the breakdown of this deficit? How much is discretionary spending and how much is non- discretionary? My guess is that, the whole amount is being raised to cover non-discretionary spending. This is a crazy scheme by dunderhead Lungu and criminal Alexander Chikwanda. These fools are borrowing, not for development, but to fill up the bottomless pit of corruption created by Sata and perpetuated by Lungu and his good for nothing PF bandits.
I pray that NOBODY subscribes to this eurobond.
On some government funded infrastructure projects the cost is exaggerated in order to fund corruption! For instance, inputs like cement are being quoted at K300 per pocket instead of the usual K75 per pocket. To borrow US$2 billion to fund such projects is broad day light robbery! Add the effect of the weakening kwacha and the interest rate of 9.5%? This is unacceptable!
But who are these useless institutions that keep on leading them money amidst political & economical misgovernance? Yet the same useless institutions insist on good governance before giving loans to some rather unfortunate countries, like Zimbabwe! Off course Zimbabwe prys on weak governments like Zambia & indirectly benefits from Eurobond by way of free maize & mortgaging Zambia for Kariba dam loans.
In case you do not know…Zambia is rated B on the Fitch Ratings… I hope that helps you. Fitch Ratings Inc. is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975
For me, Zambia and all indebted countries of the world should seek external loans only for very high priority, well-appraised, and self-liquidating projects. Such projects should have direct impact on economic development. An economic culture of transparency, in the issue of debt management, should be cultivated. Governments should make fiscal adjustments through cuts in expenditures, as this could reduce the level of deficit financing, which exerts pressure on foreign exchange. They should avoid short term financing, especially when floating rates of interest are involved. A sound macro economic environment is an important ingredient of growth because it is a logical prerequisite to proper utilization of external funds.
Like most developing countries of the world, Nigeria and South Africa relies substantially on external funds for financing its development projects – iron and steel mills, roads, electricity generation plants etc. Such external funding usually takes the form of external loans.
People the truth is this if the acquisition of additional foreign debt increases the debt servicing burden more than it increases the country’s capacity to bear the burden, such an acquisition becomes undesirable and the situation must be reversed through export expansion. If export is not expanded, more borrowing will be necessitated for servicing debt and external debt will pile up above the country’s capacity to bear.
LT.reuters qoute’in 2008 zambia ‘s debt was $67million and by 2014 it was $8billion.with the usa Reserve bank likely to increase interest by the end of the year debt servicing (interest will be adjusted up)will definitely be higher.They came to steal for sure.zambins we are in the botton pit.
“Muli ba Lungu bena kuwayawaya fye, twalomba Lesa mukalamba ena atulanguluke”! You can’t run a country perpetually on debts or Kaloba in simpler terms, as this isn’t just an ordinary credit facility. This is a government tbat never talks of internally generated revenue but always runs to international creditors for bailouts. Lungu could be a lawyer but it is pretty obvious he lacks basic skills of economic management; he’s using these debts as a survival strategy to woodwink people that PF is workn in readiness for 2016 elections when it’s us the youths & our children who will suffer when it comes to debt repayments. Please people, let us open our eyes & vote out this clueless government before our beloved country is sold to the dogs!
They are borrowing to pay wages, to campaign next year and to cover the short fall after they cut fuelbprices just before the elections. There is not a single money generating project being undertaken. If they have failed to raise this money from what we have what will change in the next 10 yrs.?
Agree with you Patrick. PF is full of thieves, illiterate and poor MPs who want more money in their pockets. We Zambians are yet to pay heavily for PF’s reckless borrowing.