Zambia’s 2025 Budget Boosts Dollar Bonds, But Locals Worry About Electricity Crisis

Zambia’s dollar bonds have surged in value following praise from Morgan Stanley for the country’s 2025 spending plan. The nation’s $1.7 billion bonds due in 2033 saw yields drop to 7.86%, marking a record decline after Finance Minister Situmbeko Musokotwane’s budget announcement on September 27. However, critics have raised concerns over the failure to address the immediate electricity crisis caused by the El Niño-induced drought, which has led to inflation and power shortages.

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. The budget’s focus on fiscal consolidation and debt restructuring has impressed global markets, with Morgan Stanley upgrading its outlook on the nation’s bonds.

However, local stakeholders are worried 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. The Zambia Debt Alliance has noted that while the budget expanded social cash transfers, it failed to address the immediate electricity crisis. The 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. As the country continues to grapple with the impact of the drought, it is essential that the government takes immediate action to address the electricity crisis and mitigate its effects on the economy and citizens.