ZAMBIA’S USD 1.25 BILLION BOND ISSUANCE IN THE INTERNATIONAL CAPITAL MARKET, Issued by Fredson Yamba Secretary to The Treasury Ministry of Finance



Zambia issued its third euro-bond on 30th July, 2015. The bond issue amounted to US $1.25 billion at a coupon rate of 8.97 percent.

The final order book reached US $2.5 billion from more than 175 investors from the United States, United Kingdom, mainland Europe and other global markets. The advance interest payment (or discount) on the bond amounted to US $34.3 million.

In terms of geographic distribution the USA took the highest share at 48%, UK took 42%, rest of Europe 9%, and other regions accounted for 1%. By investor type, fund managers took 84%, insurance & pension funds 4%, Banks/private banks 3% and hedge funds 9%.

The repayment of the USD1.25 billion euro-bond will be made in three equal installments of US $416.7 million in July 2025, July 2026 and July 2027.

The choice of amortizing the bond in three equal installments is to reduce the gravity on the Government in amortizing the US $750 million, US $1billion and the US $1.25 billion, bonds.

Despite the strong interest from investors, the Government only issued US $1.25 billion from the entire order book of US$2.5 billion.

This was premised on the need for the Government to subscribe only to those resources that were needed to finance the various infrastructure projects that Government is undertaking across the country, in the transport, energy and social sectors. This is consistent with Government policy of prudent fiscal and debt management.

In order to ensure proper utilization of the funds, the Ministry of Finance will work with the implementing ministries in a coordinated manner to ensure value for money through improved implementation and monitoring of projects.

The latest bond was a success taking into account the fact that it was issued at a time of uncertainty in the global environment, largely due to lower commodity prices and the developments in the Eurozone at the time where Greece’s IMF debt default, added to nervousness amongst some investors.

Further, the appreciation of the US Dollar against other currencies, our Kwacha included, has seen capital slowdown to emerging markets by investors.

In this regard, we factored this new borrowing into our estimates and came to a credible conclusion that we are still sustainable by all major debt thresholds.

Additionally, the use to which the resources are earmarked will in the near term result in higher growth, thereby increasing our ability to service this and other debt generally.

The process of establishing a sinking Fund has also reached an advanced stage and we will start setting resources aside for this purpose from 2016 onwards.





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