Government Plans K8BN Covid Bond

Cabinet has approved plans to issue a Covid bond to the value of K8 billion as a means of financing economic stimulus.

Specifically, the funds will be channelled towards supplier payments, retirees and contractors.

Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19, Finance Minister Bwalya Ngandu has previously stated.  

Before the pandemic Dr Ngandu had confirmed that external debt stock stood at US$11.2 billion, up from just US$1.9 billion in 2011.

Other measures taken to date include a K10 billion stimulus package by the Bank of Zambia in April and a reduction in the benchmark interest rate in May.

The approval for the bond comes as the International Monetary Fund (IMF) and the Government are set to resume talks as part of a consultative and information exchange mission.

Government had previously sought a Covid-19 credit facility from the fund, which approved debt service relief for 25 member countries in April in response to the pandemic.

The IMF recently forecast a contraction of the economy by 3.5%, citing power shortages as a significant problem in addition to the current coronavirus pandemic.

Government last week asked the Paris Club of creditor nations to suspend principal and interest payments on its debts to all official creditors until the end of December.

Zambia has been listed among countries eligible for debt relief under the Debt Service Suspension Initiative, which aims to help nations respond to the health challenges and economic shocks of the Covid-19 pandemic.

However, lenders have been reluctant to extend further credit to Zambia during the crisis, with the IMF citing existing high debts as a principal reason for not extending its Covid-19 relief funding to Zambia.