Zambian defends issuance of third Eurobond

A senior Zambian government official on Friday defended government's move to issue a third Eurobond, saying the issuance was a success despite criticism from opponents.

On July 30, 2015, Zambia issued its third Eurobond of 1.25 billion U.S. dollars to be repaid at an interest rate of nine percent, a move critics says was a sign of investor confidence in the country's ability to repay the money.

But Secretary to the Treasury Fredson Yamba said the latest bond was a success considering 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 following Greece's debt default which added nervousness amongst some investors.

He said in a statement that the issuance of the bond ignited interest from investors who totaled 175 from the United States, United Kingdom, mainland Europe and other global markets.

"It is worth noting that despite the strong interest from investors, the government only issued 1.25 billion dollars from the entire order book of 2.5 billion dollars," he said.

The official further said the repayment of the bond will be made in three equal installments of 416.7 million dollars in July 2025, July 2026 and July 2027, adding that the choice of amortizing the bond in three equal installments was to reduce the gravity on the government in amortizing two other previous bonds as well.

He further dispelled assertions that the government's appetite to borrow from the international market will plunge the country into another debt trap, adding that the government was mindful of the need to maintain debt sustainability.

Zambia issued its debut bond of 750 million dollars in 2012 at a yield of 5.625 percent and this was followed by another 1 billion dollars bond at a yield rate of 8.5 percent in 2014. The two bonds are expected to mature in 2022 and 2024 respectively. Endit