Zambia’s Eurobonds surged the most in more than a year after opposition leader Hakainde Hichilema’s shock landslide victory in the nation’s presidential election.
United Party for National Development’s Hichilema beat incumbent president Edgar Lungu by almost a million votes, the biggest margin of victory in a quarter century, in the August 12 race that had been expected to be closely contested.
The margin of victory provides Hichilema with a strong mandate to take on reforms needed to revive an economy wrecked by years of overspending, that culminated in the nation becoming Africa’s first pandemic-era sovereign defaulter in November. Annual inflation is at the highest in two decades at nearly 25%, and the economy is forecast to only narrowly avoid a second consecutive contraction this year.
The president elect will also need to reach a deal with the International Monetary Fund for a bailout, and repair relations with copper miners operating in Zambia, Africa’s second-biggest producer of the metal.
There is absolutely nothing to celebrate. This country has got a lot of challenges.
— Gary Nkombo, UPND elections chair
Zambia’s $1bn (R14.74bn) of Eurobonds due in 2024 jumped 8.3% to 72.55c on the dollar by 9.30am in London, the biggest gain since June 2020. The kwacha surged 7.7% to 19.3150 per dollar, the most since November 2015.
As far as Hichilema is concerned, “there is absolutely nothing to celebrate”, Gary Nkombo, the UPND elections chairperson, told reporters. “This country has got a lot of challenges.”
Hichilema, 59, said he hopes to seal a bailout from the IMF as soon as is technically possible and initiate debt-restructuring talks. The entrepreneur and cattle rancher plans to achieve an economic growth rate of more than 10% within five years, mainly by growing the mining, agriculture, construction and manufacturing industries.
Known as HH, Hichilema has an economics degree and a MBA from the University of Birmingham. He unsuccessfully contested the nation’s previous five presidential elections and was jailed for four months on treason charges in 2017, after his convoy of vehicles refused to make way for Lungu’s.
Lungu, who won power in 2015, said at the weekend the election was tainted because of violence in three provinces where Hichilema performed the best. He’s yet to concede defeat.
Zambia stands out in the region, having changed governments democratically twice since the late Kenneth Kaunda’s rule ended in 1991. The Patriotic Front won power in 2011 under Michael Sata’s leadership, and Lungu was elected in 2015 after Sata’s death while in office.
Near-record prices for copper, which accounts for more than 70% of Zambia’s export earnings, will boost Zambia’s coffers. Another plus is a $1.3bn (R19bn) transfer from the IMF due this month — separate to Zambia’s talks with the fund for a similar amount — that will almost double the nation’s foreign-exchange reserves.
To conclude programme talks with the Washington-based lender, which will anchor negotiations with external creditors, including holders of the nation’s $3bn (R44bn) Eurobonds, Zambia’s government may need to cut energy and farm subsidies that have depleted government accounts in recent years.
— Bloomberg News. More stories like this are available on bloomberg.com
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