Zambia’s Eurobonds and currency rallied after opposition leader Hakainde Hichilema scored a shock landslide victory in the nation’s presidential election.
Hichilema beat incumbent President Edgar Lungu by almost 1 million votes and nearly 60% support, the biggest margin of victory in a quarter century and an even better performance than his party projected. Lungu conceded defeat early on Monday afternoon.
The margin of victory provides Hichilema with a strong mandate to take on reforms needed to revive an economy wrecked by years of overspending that culminated in Africa’s first pandemic-era sovereign default in November. The president-elect will need to reach a deal with the International Monetary Fund for a bailout, and repair relations with copper miners operating in Zambia, Africa’s second-biggest producer of the metal.
Zambia’s $1 billion of Eurobonds due in 2024 jumped 11% to 74.14 cents on the dollar by 2:49 p.m. in London, the biggest gain since March 2020. The kwacha surged the most since November 2015 to 19.1375 per dollar.
“The election result clearly surprised us on the upside,” said Ray Jian, a London-based emerging-market portfolio manager at Amundi Asset Management, which has an overweight position in Zambian debt. “We intend to keep our overweight stance, and to actively participate in the upcoming restructuring of Zambian debt.”
Hichilema, 59, said he plans to seal a bailout from the IMF as soon as technically possible and initiate debt-restructuring talks.
“We will ensure there is equity in the treatment of debt,” Hichilema said in his first speech since being declared president-elect. “You have an administration that will get you to the table where you will be respected, you will be heard. And we will come to an amicable solution.”
Known as HH, Hichilema has an economics degree as well as an MBA from the University of Birmingham in the U.K. The businessman and cattle rancher is targeting an economic growth rate of more than 10% within five years, mainly by growing the mining, agriculture, construction and manufacturing industries.
Zambia depends on copper for more than 70% of its foreign-exchange earnings and Hichilema signaled he plans to strengthen the government’s ties with mining companies. Relations frayed under his predecessor’s administration, which frequently changed mineral taxes after complaining that producers were paying too little.
“You will see that the mines will come to the table, the mines will pay their fair tax,” Hichilema said. “Very soon you’ll see mining houses announcing expansion programs.”
Lungu congratulated Hichilema on his win in a brief statement in the capital, Lusaka.
“I will comply with the constitutional provision for a peaceful transition of power,” he said. “I would therefore like to congratulate my brother.”
To conclude program talks with the Washington-based lender, which will anchor negotiations with external creditors including holders of the nation’s $3 billion in Eurobonds, Zambia’s government may need to cut energy and farm subsidies that have depleted government accounts in recent years.