Zambia’s bonds plunge following investors’ concerns over debt

Zambia’s Eurobond has plummeted, following investors’ increased concern over the possibility of the southern nation having more debt than it lets on to the public.

Yields on the country’s $1.25 billion amortizing bonds due in 2027 witnessed an increase of about 54 basis points, the most since February 2016, before cutting the increase to 50 basis points on Monday, Bloomberg reported.

With Banks including Nomura Holdings Inc doubting the government’s discretion in disclosing the true status of its external liabilities, Zambia’s dollar securities holders could as well prepare for the worst, considering it’s already the worst performer in Africa year-to-date through the end of last week, according to the Bloomberg Barclays Emerging Markets USD Sovereign Bond Index.

One possible implication is that Zambian bondholders could be faced with the situation where hidden debts would lead to default and the government will in turn have to restructure. Mozambique is currently facing the same fate.

Attempts by the Southern country to get a $1.3 billion bailout for its debt from the International Monetary Fund has been abortive in the past few months, amidst the Washington-based lender’s concerns about foreign borrowings.

However, Finance Minister Margaret Mwanakatwe remains optimistic. Bloomberg noted that she plans to carry out a debt sustainability analysis to move the IMF negotiations forward and also “reprofile” $3 billion of outstanding Eurobonds.