Credit default spreads on dollar bonds in Africa’s copper producer Zambia widened 114bps on news of energy generation production haircuts at the Kariba. This follows lower than usual rainfall pattern that has impacted dam levels to 39% currently versus 54% same time a year ago. Yields on bonds maturing 2024 bearishly rose to 15.75% reversing gains earlier recorded in the year.
Energy generation is linked to copper productivity especially that the mines consume 57% of the power grid.
However, authorities had given assurance that Zambia’s energy generation capacity is still adequate from other generation sources which despite low rainfall recorded in the 2018/2019 period have still received adequate rainfall.
The copper producer grapples with higher external debt and low reserves. A Ministry of Finance treasury note earlier in the month revealed a USD$10.05 billion in external debt and USD$1.57 billion in foreign exchange reserves (Dec.18).
