The Zambian Government has paid last week the highest interest rate for an issuance of Eurobonds in the African continent.
The third round of Zambian Eurobonds in four years carry an annual interest rate of 9.375%, which made it the most profitable for primary bond buyers so far among all the African debt issuances, representing a 10% and 74.4% increase from those rates paid in the years 2012 and 2014.
Even though Zambia has paid the highest rate in Africa due to the recent country’s downgrade by an international rating company, the issuance showed that the investor confidence kept unchanged in the economic governance of the country, since the Eurobonds were in excess of two times oversubscribed, explained in a media statement Mr. Chibaula Silwamba, the Zambia’s Permanent Mission to the United Nations’ First Secretary for Press and Public Relations.
The Zambian Deputy Finance Minister, Christopher Mvunga, downplayed the rise in debt at a higher interest rate, explaining that it was a good moment to borrow due to the relatively low levels on interest rates at global scale.
As long as the Government use the funds for infrastructure-related projects mainly in the energy sector where there is currently a shortage of power generation, the rise in debt and its interest rate will be a matter of celebration, Minister Mvunga added.
According to the World Bank, the Zambian Government is paying an average interest rate on external debt 42% higher than that one paid in average in the Sub-Saharan Region, however, the country’s debt is one of the smallest ones merely representing a 1.48% of the region’s total interest payments on external debt yearly.