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Zambia

Hichilema's electoral power play

PREVIEW

A landmark debt buyback delivers lights and credibility but Zambia's grid ambitions will persist whoever wins in August

The Hichilema government has won a significant vote of approval from markets and ratings agency after completing a deal that will see it buyback a US$1.36 billion bond and channel the savings to electricity grid expansion.

A majority of investors have agreed to proceed with the retirement of a $1.36bn bond that had been due in 2053. The Finance Ministry will use a $600 million loan from the African Development Bank (AfDB), together with its own resources, to pay off the debt.

Zambia’s plan is designed to convert debt savings directly into development spending. The government intends to channel the debt repayment savings into a 15 year $275m Grid Resilience Programme, with the promise that this will increase electricity access to Zambians and boost grid capacity to help its mining sector.

While the debt deal is another major milestone in the country’s effort to reduce borrowing costs since last year’s broader debt restructuring agreement, it could also be a model for other African countries to link the early and cheaper write down debts to development (AC Vol 66 No 7,Mahama’s plans clash with IMF strictures & Dispatches 30/6/25, Accra inches towards end of debt path, but Lusaka’s cash flow woes continue).

Critically, Fitch Ratings and S&P Global Rating have deemed that the transaction should not be viewed as a ‘distressed debt exchange’ that would have been classed as a default, and that the buyback is a debt-management exercise rather than an emergency restructuring.

The deal coincides with the manifesto launch of President Hakainde Hichilema’s United Party for National Development ahead of August’s general election. The UPND has promised to create two million jobs if, as is widely expected, it wins a second term. In a sign of Hichelema’s seems confident of defeating a divided Patriotic Front but he has urged supporters against complacency during the campaign (Dispatches 9/3/26, President Hichilema waits for IMF until after the elections).

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