Editor's note: A recent article from Albert Halwampa (ZIPAR) on the costs and benefits of external borrowing through Eurobonds. It argues for a comprehensive legal and institutional framework to address the risks associated with this form of debt instrument.
There has been recent media speculation about the government issuing another Eurobond - the third in two years. Earlier this month, the Ministry of Agriculture and Livestock talked about the possibility of floating a bond to plug the US$400 million financing gap in agriculture. This has resulted in apprehension in some quarters of the economy regarding the risks associated with this seemingly allure of Eurobonds. I therefore attempt to weigh some of these risks.
Zambia successfully issued its first US$750 million Eurobond in 2012. It was oversubscribed with an interest rate of just over five percent. In 2014 another Eurobond, amounting to US$1 billion was issued with a higher interest rate of over 8.5 percent, and a lower level of oversubscription - just US$4.25 billion.
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