Zambia to issue up to $2 bln 10-year Eurobond


LUSAKA (Reuters) – Zambia will issue a 10-year Eurobond of as much as $2 billion on Thursday, one of frontier Africa’s biggest international bonds, to fund a widening budget deficit in the copper exporter, a presidential spokesman said.

“We expect the Eurobond to be issued today. It will be between $1.5 billion and $2 billion and the maturing date is 10 years,” Amos Chanda, a spokesman for President Edgar Lungu, told Reuters.

Zambia’s budget deficit is expected to swell to 20 billion kwacha ($2.64 billion) by the end of 2015 from an initial forecast of 8.5 billion kwacha.

This will be the third Eurobond issued by Africa’s No.2 copper producer. Its previous forays into the international capital markets were a debut $750 million bond in 2012 and a $1 billion bond last year.

African governments have taken advantage of rock-bottom borrowing costs and investors’ hunger for yield in recent years, with foreign debt issuance rising from $67 million in 2008 to more than $8 billion last year, according to Thomson Reuters data.

Lusaka has stated a preference for external borrowing rather than domestic because it was cheaper, but with the U.S. Federal Reserve looking likely to raise interests by the end of the year the costs of servicing debt will rise.

Zambia’s external debt currently stands at $4.8 billion, about 18.5 percent of gross domestic product. Its domestic debt burden is $3.7 billion, about 14.2 percent of GDP, finance minister Alexander Chikwanda said in June.

($1 = 7.5850 Zambian kwacha)