The Centre for Trade Policy and Development (CTPD) has commended the Zambian Government for securing an impressive 97.85 percent participation rate in its recent Eurobond buyback initiative, describing the outcome as a significant step towards improving the country’s debt management strategy.
The Ministry of Finance and National Planning launched a tender offer to repurchase a portion of Zambia’s US$1.36 billion Eurobond due in 2053.
The transaction is being financed through a US$600 million loan from the African Development Bank (AfDB), coupled with a US$65 million incentive aimed at encouraging bondholder participation.
In a statement issued today, CTPD Researcher for Public Finance Robinson Nakambo said the strong response from bondholders demonstrates confidence in the transaction structure and reflects growing trust in Zambia’s debt management efforts.
Mr Nakambo said the organisation welcomes the government’s move to replace expensive external commercial debt with lower-cost financing, especially where the financing is tied to investments that can strengthen the country’s electricity infrastructure.
“The high level of participation indicates strong acceptance of the offer by bondholders and reflects confidence in the transaction structure,” he said.
He noted that while the initiative appears promising, a comprehensive Net Present Value (NPV) analysis is necessary to establish whether the buyback will generate financial savings for the country in the long term.
Mr Nakambo said such an assessment would help determine whether the combined cost of the buyback and the new financing is lower than the future payments Zambia would have made under the existing Eurobond obligations
He further observed that although the AfDB financing appears to have been offered on favourable terms, important information regarding the loan remains undisclosed.
Mr Nakambo said details such as the interest rate, repayment schedule, grace period and maturity profile are crucial in assessing the full impact of the transaction on Zambia’s debt sustainability.
He said that the initiative has the potential to strengthen Zambia’s debt position if the total cost of the buyback and the AfDB loan, measured in present value terms, is lower than the cost of servicing the Eurobond over time.
Mr Nakambo also stressed that the success of the programme will depend on whether investments in electricity infrastructure generate sufficient economic benefits to justify the new financing.
“If these expected benefits materialise, the transaction could contribute to a stronger debt position and improved economic performance.
“However, if they do not, the buyback may alleviate one financial pressure while creating another, particularly as Zambia continues to face domestic debt-related pressures, “he said.
The Eurobond buyback forms part of the government’s broader efforts to reduce debt-servicing costs, improve fiscal sustainability and support critical investments in the energy sector.
