From Default to ‘Investable Again’: Zambia’s Long Road Back
- Derry Thornalley
- 5 hours ago
- 5 min read
Five years after missing a US$42.5 million Eurobond coupon and tumbling into default, Zambia has finally clawed its way back into the good graces of at least one major rating agency.
On Friday, S&P Global Ratings lifted Zambia’s long- and short-term foreign-currency ratings to CCC+/C from selective default (SD), formally removing the scarlet letter that has hung over the country since 2020.
“It confirms that Zambia has moved out of default status and is steadily restoring its place as a credible and investable economy,” Finance Minister Situmbeko Musokotwane said over the weekend, calling the move “a milestone in our economic recovery.”
For a copper-rich country that became a test case for the G20’s Common Framework for Debt Treatments, the upgrade is both vindication and a reminder of how fragile the gains still are.
A painful reset – and a cautious thumbs-up from the IMF
Zambia’s slide into default was the product of years of heavy borrowing, opaque loan deals and a commodity downturn. A joint study by the Westminster Foundation for Democracy and AFRODAD this year pointed bluntly to “domestic accountability failures” as a key driver of the crisis.
The repair job has been slow, but it is finally showing results.
In June 2024, the government completed a Eurobond exchange with an overwhelming majority of private bondholders, securing significant external debt-service relief.
By mid-2025, an IMF-backed analysis estimated that about 90% of US$13.3 billion of external debt had been covered by restructuring agreements – including US$6.4bn with official creditors, US$3.8bn in Eurobonds and US$1.6bn with other private lenders.
In August 2025, the IMF Executive Board completed its 2025 Article IV consultation and fifth review of Zambia’s Extended Credit Facility. The Fund described the economy as “stabilised” and the outlook as positive, with real GDP growth projected at around 5.8% in 2025 and 5.5% on average over the medium term.
Headline inflation, which had spiked amid currency weakness and food shocks, is expected to decline toward 11% by end-2025, supported by tighter fiscal policy and more disciplined monetary management.
Crucially, the IMF now judges Zambia’s debt to be sustainable provided reforms stay on track, even though the country remains at high risk of debt distress and must stick to strict borrowing limits on new domestic bonds.
One big snag: Afreximbank and the politics of “preferred” creditors
Behind the upbeat headlines lies a thorny problem: a relatively small but symbolically huge loan from the African Export-Import Bank (Afreximbank).
Unlike most of Zambia’s other commercial creditors, Afreximbank has resisted being folded into the restructuring perimeter, arguing that as a pan-African multilateral lender it deserves preferred-creditor status similar to the World Bank or African Development Bank.
Zambia disagrees – and the standoff has dragged on long enough to become a global talking point in sovereign-debt circles. Afreximbank has threatened international arbitration over the issue, a move that could set a precedent for how future African debt workouts treat regional development banks.
In late October 2025, Lusaka revealed that a third party was willing to take on around US$45 million of the Afreximbank exposure, potentially unblocking the impasse. But as of November, no final deal has been announced.
For S&P, the unresolved dispute is one reason Zambia’s new rating is still deep in “junk” territory and capped at CCC+. The upgrade recognises progress, not victory.
What the upgrade actually changes
For now, the direct impact is mostly about signal and sentiment.
It tells global investors that Zambia is no longer in default, which matters for mandates that automatically exclude SD-rated countries.
It acknowledges the government’s commitment to fiscal discipline, including a narrower budget deficit and a plan to keep borrowing within the bounds set by IMF and World Bank debt-sustainability analyses.
It reinforces a story of recovery driven by copper and agriculture, as investment in the mining sector picks up and the effects of a historic drought begin to fade.
Over time, the upgrade should help lower borrowing costs for both the Zambian state and corporate issuers. Some private-sector lenders and export-credit agencies have already responded: in July 2025, European insurer Credendo, for example, improved its medium- to long-term political-risk rating on Zambia, citing better current-account prospects and restructuring progress.
But no one is pretending the job is done. Zambia is still grappling with:
A high overall debt burden, even after relief;
Vulnerability to commodity prices, especially copper;
The risk that political pressures could derail reforms as social demands and infrastructure needs grow.
Where Verī Platform fits into Zambia’s “investable again” moment
For investors inside and outside Zambia, this is precisely the kind of inflection point that calls for better infrastructure to manage risk and access opportunity.
On the one hand, the S&P upgrade and IMF endorsements are likely to:
Draw fresh interest in Zambian sovereign bonds, both legacy and restructured;
Stimulate issuance from local banks and corporates looking to tap domestic and regional markets;
Re-ignite appetite for Zambia-linked equity stories, from copper miners to banks and consumer names.
On the other hand, the unresolved Afreximbank issue, continued high debt-distress risk and a still-fragile macro environment mean that blindly piling in is not an option.
Verī Platform is built to help regulated institutions navigate exactly this kind of landscape. Sitting behind banks, asset managers, pension funds and insurers, it allows them to:
Combine Zambian exposures – local-currency government bonds, restructured Eurobonds, Lusaka-listed equities – with wider African and global positions in a single, controlled architecture;
Plug into multiple custodians while maintaining a consolidated, look-through ledger, reconciling all assets daily;
Generate regulator-friendly reporting that shows, in one place, how much of a portfolio is tied to Zambia, to specific sectors like copper, or to particular issuers.
For a regional pension fund, that might mean re-entering Zambia by:
Taking a measured position in its new-look Eurobonds;
Adding select copper-producer equities or funds;
Offsetting that with diversified global assets – all tracked and reported through Verī, rather than scattered across unconnected custodial statements.
In a country just emerging from default, where every basis point of yield comes with a story attached, that kind of structured transparency is not just convenient – it is part of responsible fiduciary behaviour.
The next chapter: beyond the rating action
Zambia’s exit from default status is a clear step forward, but the path ahead is tight.
If the government can close the remaining gaps in its restructuring, including the Afreximbank dispute, and stick to its promises on fiscal and governance reforms, the S&P upgrade could be the first in a series – gradually lowering the cost of capital and widening the investor base.
If not, slippage could quickly show up in the bond spreads and FX market, reminding investors that CCC+ is still a long way from safety.
For now, though, Zambia has something it has not had in years: a line in an S&P report that no longer includes the word “default”. For a government trying to convince both its citizens and the markets that the worst is behind it, that single change in wording carries enormous weight.