Economist Kelvin Chisanga argues that Zambia’s decision to lift the cap on foreign participation in local-currency bonds is a calculated move aimed at easing short-term liquidity pressures.
Chisanga observed that the policy should not be mistaken for a structural fix to the country’s debt burden, but rather a tactical response to an imminent US$1 billion repayment hurdle.
He noted the timing of the move is both deliberate and delicate, given Zambia’s limited access to international capital markets post-debt restructuring.
In a statement, Thursday, Chisanga explained that the initiative could help broaden the investor base and reduce the government’s dependence on local banks for financing.
He cautioned, however, that increased foreign participation introduces risks tied to capital-flow volatility and global market sentiment.
Chisanga emphasised that any lapse in fiscal discipline or monetary credibility could trigger sharp reversals in investor confidence.
He remarked that while the policy may ease rollover risks, it does not reduce the country’s overall debt stock.
He pointed out that shifting risk from external borrowing to foreign-held domestic debt could be beneficial if managed prudently.
Chisanga highlighted that the move might also unlock credit for the private sector by reducing government crowding-out.
He stressed the measure will only work if supported by sound monetary policy and disciplined fiscal management throughout the election cycle.
