Zambia

Mining company Vedanta and its Zambian unit Konkola Copper Mines (KCM) said they were seeking urgent talks with the Zambian president following a high court order on Tuesday to appoint a provisional liquidator, Reuters reported. The news has rattled foreign investors already nervous governments in central African countries are seeking a much bigger share of resource revenues, which they say will discourage investment the region desperately needs.

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Zambia, which the International Monetary Fund has warned is at high risk of debt distress, contracted an additional $2.6 billion of new external loans last year, according to the Finance Ministry, Bloomberg News reported. If the funds are disbursed, they’ll increase the southern African nation’s external debt to $12.7 billion, from $10.1 billion at the end of 2018. The new loans suggest the government is too complacent about rapidly increasing debt risks, Gregory Smith, fixed-income analyst at Renaissance Capital in London, said by email.

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Debt stress in Zambia is set to escalate next year as the burden of hefty borrowings from China starts to weigh, throwing the copper-exporting African nation into a struggle to avoid default on its hard currency debt, analysts said. Opinions diverge on whether default can be evaded, partly because certain factors are subject to both market fluctuations and political uncertainties, the Financial Times reported.
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Zambian Finance Minister Margaret Mwanakatwe is no longer having sleepless nights over an International Monetary Fund loan the southern African nation has been trying unsuccessfully to secure for the past two years, Bloomberg News reported. “I’ve talked about four things that keep me awake. Four months ago I was saying IMF. I don’t say that anymore,” she told business leaders Tuesday in the capital, Lusaka, after delivering the 2019 budget last week.
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Zambia, which Moody’s Investors Service cut further into junk this weekend, wants help to refinance its first Eurobond that matures in 2022, President Edgar Lungu said during a meeting with his Turkish counterpart Recep Tayyip Erdogan, Bloomberg News reported. “$750 million is almost due for repayment, and I think we would seek assistance in that respect,” he said in comments broadcast over state-owned TV on Saturday.
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Zambia has seen ‘unprecedented infrastructure’ development in the last six years but at what cost to the economy? In Zambia’s past, debt has been a millstone which has held the country back. The current situation of rising fiscal deficits and public debt coupled with increased spending and flat revenues is a recipe for economic disaster. In recent years, public debt is once again rising at a significant pace, The Mast reported. Maintenance of debt sustainability will remain pivotal in the rebalancing of the Zambian economy.
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Libyan telecommunications company LAP GreenN is considering chasing after Zambia’s offshore assets after the southern African country defaulted four times on an order to pay $257 million in compensation for nationalizing a firm it invested in, Bloomberg News reported. Zambia owes state-owned LAP GreenN more than $400 million including interest, and has defaulted on payments totaling about $220 million following a 2016 judgment in the nation’s high court, according to the Libyan Post, Telecommunication and IT Holding Co. which owns LAP GreenN. Yields on the nation’s dollar bonds climbed.
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The true size of Zambia’s debt is “debatable” because the country has contracted more loans than official external debt numbers show, Bank of America Merrill Lynch analysts said. While the nation signed up for $5.3 billion in debt from 2015 to 2016 and the lender estimates it contracted another $4.4 billion last year, official external debt only grew $1 billion over the period, analysts Rukayat Yusuf and Andrew Macfarlane said in an emailed note on Thursday, Bloomberg News reported.
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Investors fretting that Zambia may have more debt than it’s let on have sent the nation’s Eurobonds tumbling, Bloomberg News reported. Yields on the copper-producing country’s $1.25 billion amortizing bonds due in 2027 rose as much as 54 basis points, the most since February 2016, before paring the increase to 50 basis points by 4:35 p.m. in London. At 8.45 percent, the yield was the highest in more than a year. Banks including Nomura Holdings Inc. say the government may have greater external liabilities than it’s made public.
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Zambia is facing tough questions over its foreign-debt levels from investors who think the real number may be more than double what the government says it is, Bloomberg News reported. Lenders including Nomura Holdings Inc. believe the state hasn’t come completely clean on how much external borrowing it’s undertaken. This is raising concern the southern African nation may be headed for a similar situation to neighboring Mozambique, where hidden debts led to default and the government is seeking to restructure.
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