Rapidly reforming Zambia attracts global bond traders like ‘a second Greece’

Key topics:Zambia's GDP set to grow 6%+ in 2025, driven by copper and debt reformsZambia bonds outperform, attracting global investor confidenceKwacha surges 19% in 2025, among Africa’s top currencies.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Matthew A. Winkler.Just when the International Monetary Fund sees slower growth around the globe, the economy the World Bank ranks 112 out of 196 based on gross domestic product is leading everyone – with the opposite outlook.That would be Zambia, the Sub-Saharan African nation of 20 million people that defaulted in 2020. The “air-conditioned state,” so-called because of its elevation and climate, is poised to watch its economy expand at least 6% in 2025, buoyed by improving rainfall, increased copper production and a debt restructuring with interest rates as low as 1% until 2037. Zambia's dollar-denominated securities now have no peers in the international bond market, and the kwacha’s performance this year is second only to Ghana’s cedi among Africa's currencies, according to data compiled by Bloomberg.Following the worst drought in two decades and the resolution of delinquent borrowings last year, Zambia Finance Minister Situmbeko Musokotwane said he is “confident that we will get to that 6%” growth rate, up from 4% in 2024, during an interview with Bloomberg News reporter Matthew Hill earlier this month in Livingstone, a resort destination five miles from Victoria Falls. His expectation is bolstered by recent rainfall ending a drought and the resurgence of Africa's second-largest producer of copper, which accounts for more than 60% of Zambia's exports. The red metal climbed 25% in the first three months of the year, its best quarter since 2009, and is up 22% for the year, the most among base metals, Bloomberg data show.“We just need to maintain for 10, 15 years -- positive growth every year,” Musokotwane said, supported by a report from Harare, Zimbabwe-based ZB Financial Holdings projecting GDP growth of 6.6% in 2025. The World Bank predicts Zambia will expand 6.2% this year and 6.6% in 2026; the IMF forecasts 6.2% and 6.8%. “People will begin to see that it's not a certainty that you are born in poverty and you will end in poverty,” he said of Zambia, a country where the World Bank says 64.2% of the population lives on less than $2.15 a day. “Things change.”.Read more:.Zambia emerges from default with $13.4bn debt deal.Global investors may be starting to agree. The $2.74 billion of dollar-denominated government securities that make up the Bloomberg Zambia Sovereign Debt Index gained 18% since July. That’s a month after the country completed the refinancing of its troubled debt, pushing out maturities on $6.3 billion in bilateral obligations to 2043, and double the total return (income plus appreciation) of the emerging-market benchmark. Bondholders are reaping a bonanza: A $100 million investment has swelled to $121 million in less than a year as lenders to emerging markets and high-yield borrowers in general turned the same amount into much less, or $109 million and $112 million, respectively..Zambia especially benefits from the restructuring. Creditors showed their confidence in the country, founded in 1964, by extending the average maturity of its dollar-denominated debt to 15 years, a superior outcome when compared with South Africa and Kenya, whose average debt maturity is 12 years, Ghana at 10 years and Nigeria at nine years, according to data compiled by Bloomberg. Zambia's public debt will decline to 100% of GDP this year from 126% in 2023, prompting Moody's Ratings tochange its outlook to “positive” from “stable.” Foreign-exchange reserves increased to a record $4.3 billion last year, according to ZB Financial. Inflation likely will slow to 8% by the end of the year from 15.3% in May, ZB Financial forecasts.Anyone wondering whether the Zambia halo will prove fleeting need look no further than Greece, which was widely reported to be “going down the drain” of default in the aftermath of the global financial crisis. That was the verdict of former Federal Reserve Chair Alan Greenspan, billionaire investor George Soros and much of the media. On the contrary, European Union creditors allowed the Hellenic Republic of 10 million people to restructure its borrowings by lengthening the average debt maturity to 26 years.Greece, at that point, was rated CCC- by S&P Global Ratings, or nine levels below investment grade, a credit score belied by the shrinking yield of the country’s benchmark 10-year debt securities, which returned more than 100% in the six months ending in December 2015. Greece bondholders since then turned their $1 million investment into $4.2 million, a 16% annualized return, according to data compiled by Bloomberg. S&P belatedly raised Greece to investment grade by 2023.Moody's rates Zambia's foreign-currency debt at Caa2, eight levels below investment grade as a borrower with “very high credit risk” and “poor standing.” Yet, Zambia bonds trade at yields that are just a little more than a percentage point above investment grade securities, signaling a long overdue upgrade, according to data compiled by Bloomberg..Zambia has similar cachet in the foreign-exchange market. After depreciating 8% in 2022, 30% in 2023 and 8% last year, the kwacha is stronger by 19% against the dollar in 2025. And since May 23, it is the world’s favorite currency, based on its gains. While the trade-weighted dollar depreciated 8% since Donald Trump became the 47th president in January, the kwacha rally extended across most currencies, including South Africa's rand, British sterling and the euro..Make no mistake, Zambia's recovery is the unlikely surprise of 2025..© 2025 Bloomberg L.P.

Rapidly reforming Zambia attracts global bond traders like ‘a second Greece’

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