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Zambia’s dollar-denominated bonds maturing in 2053 fell sharply on Wednesday, dropping by more than 2.0 percent to just below US$72, marking their biggest decline since August and placing them among the worst-performing emerging-market bonds of the day.
The sell-off followed the International Monetary Fund’s release of updated economic forecasts for Zambia, which presented a more cautious outlook for the country’s medium-term performance.
According to Access Bank’s market commentary, the revised projections “reduced expectations of enhanced pay-outs for bondholders in an upside scenario,” triggering negative market reaction.
“Although the Southern African nation completed its 38-month IMF programme on Tuesday, with the Fund’s executive board approving a final disbursement of approximately US$190 million, the projections painted a less favourable picture,” the Access Bank commentary said.
The latest disbursement brings Zambia’s total IMF funding under the programme to about US$1.7 billion since 2022.
Market analysts noted that the revised forecasts weakened prospects for higher investor returns linked to the bonds’ performance features.
The 2053 bonds, issued in 2024 as part of Zambia’s debt restructuring, include an upside trigger that allows increased payments if Zambia’s debt-carrying capacity, measured by the IMF’s Composite Indicator, reaches or exceeds 2.69 for two consecutive semi-annual periods.
“The composite indicator incorporates factors such as economic growth and the import coverage of foreign-exchange reserves,” the commentary explained.
However, the IMF’s updated projections lowered expectations across several key indicators linked to debt sustainability.
The Fund cut its 2026 GDP growth forecast to 5.8 percent from 6.4 percent and reduced next year’s growth estimate by 50 basis points to six percent.
It also revised down its forecast for the 2026 current-account surplus to 1.7 percent of GDP from 2.7 percent and projected foreign-exchange reserves at 3.9 months of import cover this year, down from an earlier estimate of 4.4 months.
“These changes imply a lower composite indicator score, previously estimated at 2.58 in April, making it less likely that the upside threshold will be met,” Access Bank said, adding that this remained the case “despite Zambia benefiting from record copper prices and historically high production levels.”
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