Tuesday, January 18

Zambia Eurobonds rise after landslide win by Lungu rival


Zambia’s Eurobonds soared the most in more than a year after opposition leader Hakainde Hichilema’s landslide victory in the nation’s presidential elections.

Hichilema beat incumbent President Edgar Lungu by nearly 1 million votes, the largest margin of victory in a quarter century, in the Aug. 12 race that was expected to be very close.

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The margin of victory gives Hichilema a strong mandate to undertake the reforms necessary to revive an economy ruined by years of overspending that culminated in the nation becoming Africa’s first sovereign defaulting country in the era of a pandemic. in November. Annual inflation is the highest in two decades, nearly 25%, and the economy is forecast to narrowly avoid a second consecutive contraction this year.

The president-elect will also have to reach an agreement with the International Monetary Fund for a bailout and repair relations with copper miners operating in Zambia, Africa’s second largest metal producer.

Zambian Eurobonds worth $ 1 billion due 2024 rose 8.3% to 72.55 cents on the dollar as of 9:30 am in London, the biggest gain since June 2020. The kwacha was up 7 , 7% to 19.3150 per dollar, the most since November 2015, according to data compiled by Bloomberg.

As for Hichilema, “there is absolutely nothing to celebrate,” Gary Nkombo, UPND president of elections, told reporters. “This country has many challenges.”

Rescue agreement

Hichilema, 59, said he plans to seal an IMF bailout as soon as technically possible and start talks to restructure the debt. The businessman and rancher expects to achieve an economic growth rate of more than 10% in five years, mainly through the growth of the mining, agricultural, construction and manufacturing industries.

Known as HH, Hichilema has a BA in economics and an MBA from the University of Birmingham in the UK. He unsuccessfully contested the nation’s five previous presidential elections and was jailed for four months on treason charges in 2017 after his convoy of vehicles refused to make way for Lungu.

Lungu, who came to power in 2015, said at the weekend that the elections were clouded by violence in three provinces where Hichilema performed best. He has yet to admit defeat.

Zambia stands out in the region, having democratically changed governments twice since the late Kenneth Kaunda’s rule ended in 1991. The Patriotic Front gained power in 2011 under the leadership of Michael Sata, and Lungu was elected in 2015 after his death. from Sata while he was in office.

Near-record copper prices, which account for more than 70% of Zambia’s export earnings, will boost Zambia’s coffers. Another bonus is a $ 1.3 billion IMF transfer due this month, aside from Zambia’s talks with the fund for a similar amount, which will nearly double the country’s foreign exchange reserves.

To wrap up talks of the program with the Washington-based lender, which will anchor negotiations with external creditors, including holders of the nation’s $ 3 billion Eurobonds, the Zambian government may need to cut subsidies to energy and agriculture that have drained the government’s accounts in recent years.

© 2021 Bloomberg


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