This is What Happens When an African Country Says It Can’t Repay Bondholders on Time
From the beginning of the COVID-19 economic crisis in Africa, African ministers have said repeatedly that they want to do everything possible to avoid a default on their commercial debt.
Yesterday’s announcement by the Zambian government that it will delay repayments on $3 billion of Eurobonds has shown why they’re so concerned.
Zambia’s Eurobonds plunged in London trading by 5% on its 2024 note. Already, African borrowers face a higher risk premium than countries in other regions and the Zambian default is probably not going to help the situation.
With global interest rates so low, even close to zero in the U.S., Europe, and Japan, it doesn’t make a lot of sense for countries to take on more bilateral concessional debt even at modest 2-3% interest rates. But the problem is if these same governments then turn to the private capital markets they’re going to be faced with the higher borrowing costs brought on by that risk premium, which is now baked into the price of bonds.
Read more about this story on the Bloomberg website.
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The post This is What Happens When an African Country Says It Can’t Repay Bondholders on Time appeared first on The China Africa Project.
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