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Zambia’s eurobond maturing in 2053 reportedly fell sharply on Friday, ranking among the worst-performing emerging-market sovereign bonds, after the International Monetary Fund (IMF) dampened expectations of a performance-linked upside that could have boosted investor returns.
The long-dated bond dropped more than two percent to just above US$71, following the IMF’s announcement of a staff-level agreement on the final review of Zambia’s Extended Credit Facility.
Once approved by the IMF’s executive board, the agreement will unlock US$190 million in funding.
While the development provides some fiscal relief, the IMF also revised down its forecasts for Zambia’s economic growth and current account position and urged the Bank of Zambia to strengthen its foreign-exchange reserves.
Read more: Zambian eurobond reportedly slumps as IMF flags weaker debt-carrying capacity
“These revisions raise the probability that Zambia may fail to meet the ‘upside case’ threshold embedded in the eurobond’s structure,” Access Bank Group said in a market commentary.
Meeting that threshold would have triggered a higher coupon and a shorter maturity, enhancing returns for investors.
Analysts also pointed to the approaching end of IMF disbursements as a turning point for Zambia’s external financing outlook — a risk that markets may not yet have fully priced in.
Investors are now turning their attention to domestic data due later this week, with consumer price index (CPI) and trade figures expected to offer further signals on the economic trajectory.
The Bank of Zambia has indicated that inflation is likely to continue easing in the coming months, supported by favourable weather conditions and subdued global oil prices.
If disinflation persists, policymakers could consider another interest-rate cut at the February 2026 monetary policy meeting, even if inflation remains above the upper bound of the six-to-eight percent target range.
The interplay of external financing pressures and domestic economic trends highlights the challenges Zambia faces as it balances debt sustainability, inflation control and growth in an increasingly uncertain global environment.
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