Africa’s red metal producer will set aside $48million (Kwacha equivalent) next year for dollar debt redemption. This was pronounced by the Minister of Finance Dr. Bwalya Ng’andu in his maiden budget to parley on Friday 27. Zambia has 3 dollar bonds running maturing in 2022,2024 and 2027.
And speaking at a post budget cocktail organized by PricewaterhouseCoopers on 28 September Secretary to the Treasury Fredson Yamba said the Ministry of Finance has amassed $9.5million YTD for 2019. “We have a little amount of about $9.5million for this year, he said in response to an enquiry during the Q&A session. Zambia’s Debt redemption fund comes in the wake of soon maturing dollar bonds in the year 2022 when the $750million falls due. The red metal producer current runs $3billion worth of dollar debts for maturity 2022,2024 and 2027.
Finance Minister, Dr. Ng’andu said Zambia will set aside the dollar equivalent of K636million to build the fund and will weigh its refinance options as 2022 nears.
Financial Analyst Mutisunge Zulu during his macroeconomic overview of Zambia in presentation dubbed “Navigating turbulent waters,” urged the MinFin to provide in-depth clarity of the exact specifics on a debt redemption strategy both at dollar and domestic debt level. Zulu said there was need for a clear redemption strategy to calm fatigued bondholders which would help boost confidence that will narrow credit default spreads of Zambia’s foreign currency bonds. He also cited the need for arrears dismantling as it will allow SMEs access liquidity that they have been deprived of over the last few years. Zulu commended the Minister for tripling the allocation towards arrears decomposition to K2.3billion compared to the 2019 number.
“We feel getting into an IMF program will assist Zambia with dollar bond pricing and this would not only be a confidence boost but will allow the copper producer more refinance options should the Ministry of Finance decide to redeem maturing debt taking that route,” Zulu said. Currently credit spreads on Zambia’s bonds have blown out to 1,650bps from levels of 800bps at start of year he echoed.
The Brexit Consultant