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Zambia has made notable strides in restoring debt sustainability and is steadily moving from a period of debt crisis management towards a more stable and strategic path, an Economist, Andrew Chibuye has said.
In his latest analysis titled, ‘Taming the Rampage Debt Bull: Zambia’s Debt Journey from Crisis to Control to a New Course,’ Mr Chibuye argues that while recent debt restructuring efforts have significantly improved the country’s fiscal outlook, major risks still lie ahead.
Chibuye noted that Zambia’s debt restructuring programme reached a key milestone in 2024 when the country successfully restructured its external commercial debt, replacing three Eurobonds with two new instruments, Bond A and Bond B, maturing in 2033 and 2053 respectively.
According to the analysis, the restructuring has substantially eased pressure on public finances, reducing foreign debt servicing costs from about 52 percent of budgeted revenues in 2021 and 2022 to around 12 percent by 2025.
Read more: Zambia secures over 97 percent bondholder support in $1.34 billion debt buyback
“The restructuring substantially reduced pressure on the national budget, with foreign debt servicing costs falling from around 52 percent of budgeted revenues in 2021 and 2022 to approximately 12 percent by 2025,” Chibuye stated.
He further observed that Zambia’s foreign exchange reserves had rebounded strongly during the same period, climbing to more than US$6.5 billion by 2026, reflecting improved macroeconomic stability and investor confidence.
Chibuye identified government’s recent tender offer to repurchase Bond B as another major achievement in the country’s debt management efforts.
The initiative followed provisions negotiated during the 2024 restructuring agreement that allowed bondholders to benefit if Zambia’s economic prospects improved.
As economic conditions strengthened, bondholders exercised those rights, prompting government to negotiate a settlement price of approximately US$828.68 for every US$1,000 in nominal value in a bid to reduce future repayment obligations.
Participation in the tender offer reached 97.85 percent, triggering a clean-up call provision that paved the way for the complete retirement of Bond B.
“The process was not a battle won or lost, but a negotiation that found its terms,” Mr Chibuye said.
He estimates that the transaction will save government approximately US$275 million, funds expected to support the 15-year Grid Resilience Programme aimed at strengthening Zambia’s electricity infrastructure with support from the African Development Bank.
However, Chibuye cautioned that Zambia’s debt burden has not disappeared.
Bond A remains outstanding, obligations to official creditors continue, and the country remains vulnerable to fluctuations in global copper prices and future borrowing pressures, according to him.
“What has changed is not the existence of debt, but the character of the herd and the direction of travel,” he observed.
He stressed that maintaining fiscal discipline, prudent borrowing and sound economic management would be critical if Zambia was to sustain the gains made through debt restructuring and avoid slipping back into financial distress.
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