$1.25bn Eurobond: Over $400m for roads

Zambia road

GOVERNMENT has allocated US$410.7 million of the US$1.25 billion Eurobond to improve roads countrywide.
Deputy Minister of Finance Christopher Mvunga told Parliament yesterday that US$268 million has been allocated for the domestic debt swap and clearance, US$40 million for maintenance of canals and procurement of maritime equipment.
He said US$45.2 million and US$20.3 million is for infrastructure development in the education and health sectors, respectively.
“A total of US$20 million has been allocated for water and sanitation projects, other allocations are US$45.2 million for citizens and youth empowerment, US$21 million for the agriculture sector and US$15 million for lending to state-owned enterprises,” Mr Mvunga said.

He was responding to a question by Mwembeshi Member of Parliament (MP) Austin Milambo (UPND) who wanted to know which projects will be financed using the US$1.25 billion Eurobond that was recently issued.
Mr Milambo also wanted to know how much will be spent on each project when the loan is due for repayment and what measures have been taken to ensure that the government does not default on the repayment.
And Mr Mvunga said the balance of the Eurobond has been earmarked as part of financing for the 2016 budget, which is currently under debate in Parliament.
He said the funds have been allocated for financing infrastructure development in the roads, education and health sectors.
“The US$1.25bn Eurobond was structured such that it will be redeemed in three equal instalments of US$416,667,000 in July 2025, July 2026 and July 2027,” he said.
Mr Mvunga said to ensure that Government does not default on the repayment, a sinking fund shall be established in line with the requirement of the Loans and Guarantees Act Chapter 366 which gives power to the minister of Finance to establish a sinking fund for the purpose of accumulating monies that will be used for the repayment of bonds of maturity.
He said a similar sinking fund has already been established for the repayment of the other two sovereign Eurobonds through the issuance of the Statutory Instrument No. 75 of 2015, which was gazetted in October.
Mr Mvunga said the setting up of the sinking fund does not, however, preclude other choices such as refinancing options.