Group urges caution, transparency, accountability on $1.36bn Eurobond Buyback deal

The Civil Society for Poverty Reduction ( CSPR) has called on the Government to uphold maximum caution, transparency and accountability in the planned repurchase of Zambia’s restructured Eurobonds.

CSPR Executive Director Isabel Mutembo Mukelabai said the organization reviewed the Ministry of Finance and National Planning’s announcement to repurchase about US$1.36 billion in Fixed Rate Step-Up Amortizing Notes due 2053.

In a statement issued in Lusaka, Mukelabai described the transaction as a Liability Management Operation and a debt-for-development or debt-for-energy conversion involving replacement of commercial debt with a multilateral loan.

According to Mukelabai, the deal involves a $600 million concessional loan from the African Development Bank as the primary source of financing, linked to a national infrastructure investment programme.

Read More: Bondholders oppose Zambia’s US$1.36 billion bond buyback offer

“CSPR recognises that debt management decisions of this nature have important implications for the country’s fiscal stability, exchange rate position, public accountability, and long-term debt sustainability,” she stated.

Mukelabai observed that the step-up nature of the Eurobond was a critical feature as coupon rates would progressively increase over the life of the notes, imposing an escalating debt service burden on the Treasury until 2053.

“By retiring this instrument now, Zambia avoids those rising future payments. However, it is imperative to consider that the $600 million AfDB loan introduces a new long-term external liability that must be carefully assessed,” she said.

On the positive side, Mukelabai said the transaction presented an opportunity for Zambia to reduce the burden of an expensive external commercial debt instrument and ease future repayment pressure.

WARNING! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.