Zambia risks defaulting on its payment of the Eurobond funds it borrowed to finance infrastructure projects, a local think-tank said on Thursday.

eurobond
eurobond

The Zambia Institute for Policy Analysis and Research (ZIPAR) said Zambia risks defaulting on its payment unless adequate mitigation measures are put in place.
In its report entitled “A cautionary tale of Zambia’s international sovereign bond issuances” the think-tank said the government should consider setting up a joint sinking fund to insulate adverse macroeconomic conditions that may have a negative bearing on its repayment of the funds.
According to the report, the fluctuation of the local currency against other international currencies, declining copper prices and dwindling import reserves will have a negative bearing on Zambia’s resolve to repay the funds.
“Government should consider setting up a joint sinking fund to insulate adverse macroeconomic conditions. This fund can help government to go into the market and buy back some of the bonds, thus reducing the value of the existing debt,” Shebo Nalishebo, a research fellow from the think-tank, said.
The researcher said default was on the horizon due to a downward trend of some macroeconomic indicators such as the rising fiscal deficit at 5.2 percent of Gross Domestic Product (GDP), increasing public debt at 32.4 percent of GDP and declining copper prices.
Zambia borrowed 750 million U.S. dollars in 2012 and 1 billion dollars in 2014 from the international market to finance infrastructure development projects. The two loans are supposed to be paid in 2022 and 2024. Enditem

-Xinhua

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