The largest global development institution the International Finance Corporation, a wing of the Washington based lender, World Bank on December 19, issued a $10 million kwacha equivalent fixed income asset in Africa’s second largest copper producer. The K234 million bond has been issued to support and deepen domestic capital markets in an exchange rate volatile and liquidity constrained environment. This is the third issuance after the K193.2million bond sale in August 2022 (circa. $10 million) and a debut K150 million in September of 2013 (circa. $28.4 million). This brings the total issuances to K577.2 million in the last decade.
According to a press release on the IFC website, the fixed income instrument is priced 400 basis points below the 5 year government security at 18% and was raised via private placement.
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“Increasing the availability of local currency financing is essential for local businesses and a key priority for IFC,” said Martin Habel, Head of IFC Treasury Client Solutions in Africa, Europe, Middle East, and Central Asia. “With these bond issuances, IFC was able to both source local-currency funding for its local currency lending program and at the same time return to Zambia’s domestic capital market after several years. Deep and liquid domestic capital markets support economic growth and development.”
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Commenting on an interview panel at the Public Private Dialogue, IFC Regional Director for Eastern Africa Mary Porter Peschka said, “Local currency financing is important for countries like Zambia, we are doing local currency financing across emerging markets we see it as a great way of helping nations feeling squeezed by foreign currency constraints. You mentioned a local currency bond, watch the space, another one maybe coming your way. And for the corporates here in Zambia, we did a $35 million local currency finance extension to Zambeef which we are proud of which helped them expand their tax revenue contributions which the government appreciated but also created 1,400 jobs supported SMES, small holder farmers and supply chains. We have done another local currency one to financial institutions that will support acceptance to finance to local entrepreneurs especially those in rural areas and for women finance. Local currency finance will remain strong and we see other opportunity areas aligned to the public private stakeholders we have been engaging with.”
The bond was arranged by First National Bank and Absa Banks jointly, issued with the support of the World Bank Group’s International Development Agency.
Zambia currently grapples with currency depreciation pressures that have triggered monetary tightening that has kept the government security yields elevated. Some of the homogenous themes in the private sector pulse over the period has been lack of liquidity and input inflation.
The two IFC bonds brings the total fixed income listings on the local bourse to three with the inclusion of a $200 million green bond sale announced by Copperbelt Energy Corporation at the COP28 summit.
The Kwacha Arbitrageur
