Zambia's Bonds Climb After 2025 Budget Wins Praise from Morgan Stanley
TLDR
- Zambia's dollar bonds surged following praise from Morgan Stanley for the country's 2025 spending plan.
- Yields on the nation's $1.7 billion bonds due in 2033 dropped to 7.86% after Finance Minister Situmbeko Musokotwane's budget announcement on September 27.
- Critics highlight concerns over the failure to address the immediate electricity crisis caused by the El Niño-induced drought, impacting inflation and power shortages.
Zambia’s dollar bonds surged after Morgan Stanley praised the country’s 2025 spending plan, even as locals voiced concerns over its failure to address the impact of the worst drought in a century. The nation’s $1.7 billion in bonds due in 2033 saw yields drop to 7.86%, marking a record decline following Finance Minister Situmbeko Musokotwane's budget announcement on September 27.
Morgan Stanley strategist Neville Mandimika upgraded Zambia’s bonds to “like” status, citing strong fiscal performance, with revenues exceeding expectations and controlled expenditures in early 2024. The outlook suggests room for further fiscal consolidation, bolstered by rising copper output and prices, Zambia’s key export.
However, critics such as the Zambia Debt Alliance noted that while the budget expanded social cash transfers, it failed to address the immediate electricity crisis caused by the El Niño-induced drought, which has led to inflation and power shortages.
Key Takeaways
Zambia’s 2025 budget has impressed global markets but left local groups concerned about its impact on pressing issues like the ongoing electricity crisis. The budget’s focus on fiscal consolidation and debt restructuring helped drive bond yields down, with Morgan Stanley upgrading its outlook on the nation’s bonds due to rising copper revenues and controlled spending. However, local stakeholders worry about the lack of immediate measures to mitigate the effects of the drought on businesses and households, especially in the face of high fuel costs. Zambia’s government remains under pressure to balance international financial commitments, such as its IMF program, with addressing the needs of its citizens, who face rising costs and energy shortages. The coming years will be crucial for the government to navigate these competing demands while maintaining economic stability.
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