IMF Deadlock Makes Zambia’s Bonds the Worst in Emerging Markets

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On Monday, the kwacha weakened 1 percent against the dollar, the most globally, to its lowest level in almost six weeks. Photographer: Waldo Swiegers/Bloomberg

It’s been a bad start to the year for Zambia.Its Eurobonds are the worst-performing debt among emerging-market sovereign issuers, having lost 5.8 percent, according to Bloomberg indexes. On Monday, the kwacha weakened 1 percent against the dollar, the most globally, to its lowest level in almost six weeks.

Heavy Losses

Doubts over whether the government will secure a $1.3 billion bailout from the International Monetary Fund have resurfaced among investors. Without a deal, Africa’s second-biggest copper producer could be in trouble, given that the IMF said in October it was at “high risk of debt distress.”
Last week’s events did little to reassure traders. In the space of two days, the government announced plans to restructure its bilateral debt with China, and replaced Finance Minister Felix Mutati, who was key to the IMF negotiations and widely seen as a steadying hand on the economy. The Washington-based lender then rejected the government’s borrowing plans for a second time on Friday, saying they “continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability.”

Markets reacted by selling off the country’s bonds. Yields on Zambia’s dollar securities due in 2024 rose to 7.94 percent last week, more than 170 basis points above their January low.

Stuart Culverhouse, chief economist at Exotix Capital in London, said Feb. 13 that it’s no longer clear the government wants an IMF program, especially if it entails significant fiscal adjustments. He also said any hopes that copper’s 18 percent rise in the past year would save Zambia from needing a bailout were “misplaced.”

Source:Bloomberg

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40 COMMENTS

  1. Got played again just like in the early eighties, when KK decided to start auctioning the ZmK against USD. Painful years to come, Lungu must go just right now.

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    • The is a temporary correction. The real trend will only be seen in a few weeks time. it was expected that the financial markets would react to the combo of the failed IMF deal and the removal of the smooth talking minister with the begging bowl.

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    • In plan language the bond holder in London will be smiling while your S*hole country spends more and more of its tax money paying increasing interest rates on the bonds….

      Ati IMF can go away…. you have not seen whats coming yet…

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    • This is how international finance works, all it takes is a rumour or a news article and we have a snow ball effect. It is called efficient market hypothesis. This amount the State wanted from IMF is minuscule and can be raised by the State if it was to cut on wastage of funds through the huge expenditure on liabilities such as luxury SUVs, first class and business class trips for non performing govt officers getting huge allowances and salaries. The bloomberg author of this article might even be connected to some IMF officials or other parties that have an interest in seeing Zambia’s economy drop. Read inbetween the lines these guys know Zambia has the means to be self reliant but they opt to keep silent and want the nation to remain a beggar! May they be judged accordingly by God!

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    • The sad part is we now have a clueless drunk in Margaret Mwanakatwe to manage the country’s treasury. As for Edgar, this language is totally alien, the money simply doesn’t know anything

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    • They say History repeats itself! Before colonialism the Europeans would trade with Africans in a manner that saw only the tribal/ village chief and elders benefit. This pattern continued after gaining Independence, what I’m saying is these Europeans in whatever form be they IMF, or so called Investors have absolutely no interest in you as an African you mean nothing to them, if your leaders go and buy luxury SUVs from burrowed funds while your kids have no books in school despite you fighting for that money to pay for their school fees then its up to you to raise it as an issue otherwise you will continue being a slave being used both by African slave owners and Western buyers!

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    • We told you but you don’t want to listen. Your STYOPET decisions are affecting all of us. Our relatives are going days without food.

      Your PF-STUP1DITY is degrading our country. Even if you build blocks of flats, build casinos & have billions, poverty will come to your door-step. Look at FTJ’s children, where are they? One is currently in court for stealing a cell-phone. 2021 is too far.

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    • That is the ‘visionary’ president who muscled his way to the presidency, and bribed his way out of treachery.

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    • @2020VISIONLESS.

      You started very well then you realised oh! I m in Lungus pocket then you shifted the blame on to the article author.

      IMF have asked for credible information from Koswe mumpoto and he told lies when these people s eyes are every where these Koswes are hiding money. They know when Lungu steals and banks money abroad.

      Another issue PF should not neglect is poor governance This alone is a huge factor that causes financial political risk to increase astromically to levels that dent a country s financial credibility. IMF pointed this out by siting ZIM but Koswe mumpoto Lungu chose to ignore it.

      Banya bamambala basa sokolola ndalama banaiba or charge civil servants to fund their luxury expenditure.

      On the ground people have seen that Lungu is a thief.

      LUNGU…

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  2. IMF had a plans and they really wanted to overtake Zambia China deals. Despite their first attempt failure, they had promised to come back and in their own words, “WE shall overcome king cobra”. Our great lose was their benefit because one my true President Mr Sata would’ve strike back.

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  3. What does this mean? This is too complicated for most Zambians. Sure, even Lungu and his new Finance Minister don’t know what is happening.

    IMF is telling us that borrowing and spending cannot go on forever. They are saying we need to make a plan on how to repay the money we have already borrowed. But Government is broke!

    So where is the money to repay the kaloba going to come from? The money PF has stolen?

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    • Its means more and more of your tax money will be spent paying interest on the bonds and the bond holders in London will be smiling while your S*hole country will have less and less money to spend. This is the beginning…. go see what happened to Mexico.

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    • The govt should not take this IMF loan saga lightly. It is time prudent saving measures were put in place to minimise the impact of impending cash crunch. Abolish DC and Deputy minister posts and cut down on all types of allowances by 50% given to any govt employee and its associated agencies. Spend only on projects with significant social and economical impart on the citizens.The money being saved should go to the sinking fund. The time to act is now. Margaret Mwanakatwe’s English accent wont save us.

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    • And close most of the foreign Zambian embacies were PF caders are sent on holidays , they are a massive drain on the treasury….

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  4. This has nothing to do with Maggie, if anything it shows that the Imperialist Monetary Fund (IMF) are really not happy with Zambia having an independent thinking Finance Minister. They want a “yes boss” type such as Mutati whom they can easily control! Shame on them! Still we wait and see how Maggie performs! Ba Maggie if you are reading this and I believe you are please cut or remove all ministerial allowances, salaries and stop buying luxury SUVs for line ministries and all supporting institutions such as ZDA, IDC, ZRA, PACRA, RDA, ERB etc etc that money spent is not value for money but just a wastage of resources. Zambia can easily save up to a billion dollars a year if these measures are introduced. Let’s show the world we can do it!

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    • 2020vision, do you really think your advice will be taken? You must be living in a different world? What Maggie knows is borrow, borrow and borrow and don’t repay. If she could on little money, with much resources at her disposal, she is in dreamland right now?

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    • 2020Vision the issue of SUVs can only come from the head of state otherwise your advise is falling on deaf ears.
      it should be a government policy that all ministers,PS,directors etc can only get an entry point Toyota hilux,if some one wants an SUV they can buy from their pockets..

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  5. No more luxury vehicles. Lets get on bicycles. Going to work by bicycle means no fuel consumption.
    So here are the interventions.

    Travel within Lusaka: Bicycle
    Travel outside Lusaka: Motorbike
    Travel outside the country: Air Mahogany. No business class.
    Travel across oceans: Pontoon.

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    • @7 Chitapankwa they can have vehicles but normal ones not these SUVs,a Toyota land cruiser VX costs 188,000 dollars,ask Felix Mutati how many government has and do your math…even if you remove duty

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  6. This country is endowed with more than ample resources to generate own wealth, but does not have the leadership that can apply itself to work the resources to benefit the masses. The current leadership is clueless and would rather borrow to steal than break a sweat to apply ingenuity to employ “home – grown” innovative programmes to improve the lot of our people. The thieving and corrupt administration is inept to think outside the box to grow the economy.

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  7. The Zambian economy got progressively sick under Alex Chikwanda , it got some stability and growth momentum under steady Mutati and now we’re back to Mwanakatwe sickness.Lungu should know that markets don’t like uncertainty and upredictability.

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    • Enka you are soft on Mutati because of your biaseness to the former Ruling Party…there was no stability under him!!

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  8. Whoever you are God bless you. Finance Minister look for help from within our country. Indeed there is need to cut down on spending. Imagine buying a vehicle costing K2 million for an officer using taxpayers money? These so called conditions of service blah blah in quasi GOVT institutions must be relooked. We can do it. If it means drinking munkoyo and having one main meal so be it. Fellow Zambians let us stop borrowing from the very people who are calling us with all sorts of names. Africans coming from s…h…countries and then you go there to ask for money? Africa believe in yourself!! Africa is the riches continent in terms of natural resources.

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    • We have the natural resources but we do not have the industries to make finished products. That is the mistake all African countries made when they got their independence. Africa is paying heavily for this mistake with countries like Nigeria producing crude oil but with persistent fuel shortages.The solution of Africa lies in industrial revolution with focused leadership not these current clueless jokers we have at the moment.

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  9. I’m not going to claim I know much about money, if anything at all. But I do know we are suffering for the sins of our fathers, who surrender rights to our land to the Chinese for example in exchange for (insert your typical foreign investment here)
    That investment is a bandaid that satisfies a temporary itch and lines the pockets of the few Zambians supposedly representing its people. They die rich and their children squander what is left until all that is left is less than what we started with for the majority of us. I dunno, just my 2 ngwee

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  10. This is how incompetent Lungu is – even a Cabinet reshuffle he can’t manage it properly just like Zuma.
    How do you remove an economic strong man like Mutati when your economy needs him most. I think Lungu wanted Lusambo to be the Finance minister so that he can continue publicly boot licking him!

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    • Economic strong man!! Is that a joke…Lazy Lungu could nominated anyone even headhunted like LPM but he has a selfish agenda.

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  11. Bring the champagne, its party time for upndeez, remember they only celebrate misfortune of Zambians more like blood sucking witches and vampires.
    Unfortunately, from the votes point of view that does not work well for them as people now associate the rising cost of living with the blood suckers.

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  12. Bring the champagne, its party time for upndeez, remember they only celebrate misfortune of Zambians more like blo.od suc.king witc.hes and vam.pires.
    Unfortunately, from the votes point of view that does not work well for them as people now associate the rising cost of living with the blo.od suc.kers.

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  13. I always wonder why we Zambians or Africans can not see why IMF, World Bank and any other so called world Financial Giants from the west gets jealous on who ever comes up with a new Financial strategy or formula that works against there benefits. Giants of the East have risen to open our thinking calibre. Bravo the East for better or worse, filiuko tulelola…!!!

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    • So why borrow from them in the first place if they are jealous.

      IMF does not want to give money to Zambia but Lungu is trying all the tricks.

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