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Introduction
In a significant stride towards the development of Zambia's domestic capital markets, the International Finance Corporation (IFC), a member of the World Bank Group, recently announced the issuance of its second Zambezi bond. With this move, IFC aims to foster local currency finance accessibility and stimulate the growth of the country's capital markets. This development follows a notable milestone achieved in September 2013 when IFC issued its first Zambezi bond, marking the first international issuance in Zambia's domestic capital markets.
The Second Zambezi Bond:
Paving the Path Forward IFC's latest Zambezi bond, worth 193.2 million Zambian kwacha (approximately $10 million), underscores the institution's commitment to advancing Zambia's capital markets. The bond carries a five-year tenure and functions as a floating rate note, with its coupon linked to the 182-day Zambian Treasury bill yield minus 50 basis points. The successful oversubscription of this bond highlights investor confidence in Zambia's evolving financial landscape and IFC's role in driving its growth.
Looking back to September 2013, IFC introduced the concept of the Zambezi bond by issuing a 150 million kwacha bond (equivalent to around $28.4 million). This inaugural bond held historical significance as it was the first kwacha-denominated bond by IFC and the first placement by a nonresident issuer in Zambia's domestic capital markets. It was also the debut issuance under IFC's Pan-Africa Domestic Medium Term Note Programme.
Benefits for Zambia's Capital Markets
1. Enhanced Access to Local Currency Finance:
The Zambezi bonds enable IFC to inject local currency funding into Zambia's capital markets, facilitating increased access to finance for businesses operating within the country. This is a critical factor in supporting economic growth and development.
2. Strengthened Market Reputation:
IFC's involvement in Zambia's capital markets elevates the market's credibility on the global stage. The successful issuance of these bonds signals investor trust in Zambia's economic prospects and financial stability.
3. Diversification Opportunities:
Zambezi bonds provide investors, both local and international, with an avenue to diversify their portfolios. This diversification supports the resilience of the financial ecosystem and encourages sustainable investments.
4. Private Sector Development:
A vibrant capital market nurtures the private sector, which is a key driver of job creation and economic prosperity. The availability of local currency financing supports the growth of small and medium-sized enterprises, contributing to overall economic development.
Conclusion
IFC's continued engagement in Zambia's capital markets through its Zambezi bonds marks a significant chapter in the country's financial evolution. The second Zambezi bond issuance, building upon the success of the first in 2013, exemplifies IFC's dedication to fostering domestic capital market growth and local currency finance accessibility. As Zambia's capital markets continue to flourish, they set the stage for a more resilient and prosperous economic future.
Source :
IFC. (2023, August 24). IFC Issues Second Zambezi Bond to Support Zambia’s Capital Markets. Retrieved from https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=27718
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