Zambian currency rally on debt revamp deal


Zambia’s currency and dollar bonds traded near multi-month highs, having chalked up double-digit gains so far this month on expectation that the nation is about to clinch a debt restructuring deal with official creditors, possibly as soon as Thursday.

The kwacha has strengthened 11,4 percent this month, the biggest gain among about 150 currencies tracked by Bloomberg, rising on Thursday to approach a two-month high versus the dollar.

Zambia’s eurobonds have returned 10,1 percent, a performance bested only by El Salvador and Argentina. That compares with the 1,5 percent average return for emerging and frontier peers in a Bloomberg index.

The bond due 2027 is trading near the highest since September.

A senior US Treasury official said Wednesday they hoped a deal to restructure Zambia’s crippling debt load was “imminent.” President Hakainde Hichilema said, meanwhile, he was confident a deal would be wrapped up, suggesting it could be announced this week in Paris, together with French President Emmanuel Macron and Chinese Premier Li Qiang.

The International Monetary Fund said on Tuesday an agreement could be reached this week.

“The rally will have further legs if the IMF unlocks the delayed disbursement and investors find the conditions of the deal comforting,” said Gergely Urmossy, an emerging market strategist at Societe Generale in London.

Zambia has been struggling to revamp US$12,8 billion in external loans since becoming Africa’s first pandemic-era defaulter in November 2020