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Zambian Eurobonds, particularly the 2053 maturity, saw a sharp decline on Wednesday following the International Monetary Fund’s (IMF) latest review, which flagged the country’s deteriorating debt-handling capacity.
According to an analysis by Access Bank Group, the bond dropped by over 3 percent, closing at its lowest level in a month—around US$71.
“The IMF’s fifth review of Zambia’s lending programme showed a decline in the debt-carrying capacity indicator to 2.58 from 2.62, driven largely by a worsening import coverage ratio,” Access Bank noted.
The score remains below the 2.69 threshold required for medium debt-carrying capacity, dampening investor sentiment and bondholder expectations for improved terms.
Zambia’s restructured bonds, including state-contingent debt instruments, are tied to the country’s economic performance.
Better outcomes trigger higher payouts.
However, the latest IMF assessment has raised concerns about the country’s ability to meet future targets.
The Fund is expected to review Zambia’s contingency clause with official creditors by the end of 2025.
Should the country achieve a medium debt-carrying capacity, it could unlock more favourable debt terms, including accelerated principal repayments and increased interest payments.
Meanwhile, on the international front, China’s exports rose by 7.2 percent in July—the fastest pace since April—beating market expectations. Imports also climbed 4.1 percent, resulting in a trade surplus of US$98.2 billion.
The strong export performance, despite high U.S. tariffs, suggests resilient global demand.
Analysts attribute some of the earlier gains this year to front-loading by exporters to preempt further trade barriers.
However, recent declines in port activity suggest a possible slowdown ahead.
In response to persistent trade tensions, China has increasingly rerouted production through third countries such as Vietnam and Mexico.
Their share of U.S.-bound value-added exports has surged from 14 percent in 2017 to 22 percent in 2023.
In the UK, financial markets are anticipating a 25 basis point interest rate cut by the Bank of England, amid signs of economic softness.
GDP growth has stalled, unemployment has edged up to 4.8 percent, and inflation remains stubbornly high at 3.6 percent.
Against a backdrop of global trade uncertainty and rising oil prices—fueled in part by conflicts in the Middle East—policymakers are expected to take a cautious, data-driven approach.
A rate cut could ease mortgage burdens and offer a modest boost to household consumption.
However, persistent inflation may limit the scope for additional cuts, tempering hopes for a robust economic rebound.
For the British pound, any reduction in the Bank Rate, particularly if coupled with dovish forward guidance, could exert downward pressure—especially if other major central banks maintain a more hawkish policy stance.
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