It’s been a bad start to the year for Zambia.Its Eurobonds are the worst-performing debt among emerging-market sovereign issuers, having lost 5.8 percent, according to Bloomberg indexes. On Monday, the kwacha weakened 1 percent against the dollar, the most globally, to its lowest level in almost six weeks.

Heavy Losses

Doubts over whether the government will secure a $1.3 billion bailout from the International Monetary Fund have resurfaced among investors. Without a deal, Africa’s second-biggest copper producer could be in trouble, given that the IMF said in October it was at “high risk of debt distress.”

Last week’s events did little to reassure traders. In the space of two days, the government announced plans to restructure its bilateral debt with China, and replaced Finance Minister Felix Mutati, who was key to the IMF negotiations and widely seen as a steadying hand on the economy. The Washington-based lender then rejected the government’s borrowing plans for a second time on Friday, saying they “continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability.”

Markets reacted by selling off the country’s bonds. Yields on Zambia’s dollar securities due in 2024 rose to 7.94 percent last week, more than 170 basis points above their January low.

Stuart Culverhouse, chief economist at Exotix Capital in London, said Feb. 13 that it’s no longer clear the government wants an IMF program, especially if it entails significant fiscal adjustments. He also said any hopes that copper’s 18 percent rise in the past year would save Zambia from needing a bailout were “misplaced.”


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