Debt crisis eases, but risks remain-Chibuye

By BUUMBA CHIMBULU

FINANCIAL and Economic Expert Andrew Chibuye says Zambia has made significant progress in restoring debt sustainability, transitioning from crisis management to a more strategic and controlled approach, although the country still faces considerable fiscal risks.

In his latest analysis, Taming the Rampage Debt Bull: Zambia’s Debt Journey from Crisis to Control to a New Course, Mr Chibuye argued that recent debt restructuring measures had placed the country on a more stable footing while underscoring the need for continued discipline.

He noted that by 2024 Zambia had successfully restructured its external commercial debt, replacing its three Eurobonds with two new instruments—Bond A, which matures in 2033, and Bond B, which matures in 2053.

“The restructuring substantially reduced pressure on the national budget, with foreign debt servicing costs falling from around 52 percent of budgeted revenues in 2021 and 2022 to approximately 12 percent by 2025,” according to Mr Chibuye.

During the same period, the country’s foreign exchange reserves recovered strongly, rising to more than US$6.5 billion in 2026.

He identified the government’s recent tender offer to repurchase Bond B as another important milestone in Zambia’s debt management strategy.

The move followed provisions negotiated during the 2024 restructuring that allowed bondholders who accepted losses to benefit if Zambia’s economic outlook improved.

As economic conditions strengthened, bondholders exercised those rights while government sought to limit future repayment obligations through negotiations that culminated in a settlement price of about US$828.68 for every US$1,000 in nominal value.

Mr Chibuye said participation in the tender reached 97.85 percent, triggering a clean-up call provision that clears the path for the complete retirement of Bond B.

“The process was not a battle won or lost, but a negotiation that found its terms,” he writes.

He estimated that the transaction would save the government approximately US$275 million, resources that were expected to be channelled towards strengthening the national electricity grid through a 15-year Grid Resilience Programme backed by the African Development Bank.

Despite the gains, Mr Chibuye cautions that Zambia’s debt challenges have not disappeared.

Bond A remains outstanding, repayments to official creditors are still due, and the country continues to face risks from fluctuations in global copper prices and future borrowing obligations.

“What has changed is not the existence of debt, but the character of the herd and the direction of travel,” he observed.

He said while Zambia had brought greater control to its debt management strategy, maintaining fiscal discipline and prudent economic policies would be essential to sustaining the progress achieved so far.