Bondholders likely to take Zambia to task or risk debt contagion in sub-Saharan Africa

Edgar Lungu, president, Zambia

BONDHOLDERS were likely to put up a fight in order to prevent Zambia’s debt-crisis setting a troubling precedent to other debt-holders in sub-Saharan Africa, said Bloomberg News citing an economist.

“Zambia may very well be the most prominent battleground that this tension between creditors plays out,” Irmgard Erasmus, an economist at South Africa-based NKC Africa Economics told the newswire.

“Eurobond holders, in particular, are certain to use all the weapons in their arsenal to limit moral hazard to the rest of sub-Saharan Africa,” she said.

A group that holds about 40% of Zambia’s $3bn in outstanding Eurobonds has already said it won’t support a Zambia government proposal for a six-month freeze on interest payments.

Bloomberg News said investors may be doubting Zambia’s political will to tackle is mounting debt problems after Finance Minister Bwalya Ng’andu reportedly said the country could have paid a $42.5m coupon payment that it had skipped.

Ng’andu, who started the job last year, needs to balance the competing interests of Eurobond holders and mainly state-owned creditors from China, to whom Zambia owes even more money, said Bloomberg News.

One mote of hope for Zambia has been the 50% rally in the copper price which has helped the country stabilise foreign exchange reserves. The country derives about two-thirds of its foreign exchange earnings from the red metal.


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