Zambia calls for domestic debt to be part of major indices

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Zambia’s domestic bonds should be added to international benchmark indices, said the country’s finance minister, after global investors piled into debt denominated in the world’s best performing currency of 2026.

Africa’s second biggest copper producer, whose local currency bonds are not currently included in major indices that big investors track, has enjoyed strong demand for its debt this year after opening up bond issuance to more foreign ownership in January.

Situmbeko Musokotwane told the FT that “the level of interest in our local bond market shows a clear case for including Zambia in any international index”.

His call highlights the power of international bond benchmark providers to direct hundreds of billions of dollars of capital flows across developing nations eager to attract foreign investment.

Local currency debt of so-called frontier markets such as Zambia has traditionally been much less liquid than dollar debt, but investors are hoping that JPMorgan could soon launch an index covering many such countries.

The US bank runs benchmarks for the dollar debt and local currency bonds of larger emerging markets and has been consulting on a possible frontier market index of local debt, according to investors familiar with the discussions.

Musokotwane said he could not comment on “any ongoing conversations” about benchmark inclusion. JPMorgan declined to comment.

Demand for Zambia’s kwacha bonds has surged since the country raised a cap on foreign participation in government bond issuance over the course of a year from 5 per cent to 23 per cent to help refinance maturing debt this year. The government is aiming for 15 per cent participation in the medium term.

In two bond auctions held so far this year, investors bid K32bn ($1.7bn) for K8.4bn in debt offered by Zambia. The country ultimately sold K19bn at yields of between 14 and 19 per cent, compared with current local interest rates of 13.5 per cent.

“Since we increased the limits for non-residents, international investors have accounted for 49 per cent of purchases,” Musokotwane said. “Evidently, our local market is maturing and investors have taken note.”

FTSE Russell already operates a frontier market local currency index that tracks about $500bn in debt of 14 countries including Bangladesh and Vietnam, but currently not Zambia.

JPMorgan’s existing indices usually require sovereign bond issues to be at a minimum $500mn in size for inclusion, a threshold that frontier countries such as Zambia could struggle to hit without adjustments.

Zambia is only just emerging from a 2020 default on its external debt, although it never restructured its domestic currency bonds. It limited foreign purchases of new debt for many years in order to control capital outflows while under an IMF bailout.

The Zambian kwacha has risen by more than 17 per cent against the US dollar this year, as copper prices smashed records and Zambia’s central bank reinforced restrictions on domestic use of foreign currency.

The local currency bonds of smaller, frontier nations have become a lucrative trade for emerging markets investors in recent years, often providing high interest rates in the wake of painful fiscal reforms and currency depreciations while also benefiting from a weaker dollar.

This year Zambia has also begun allowing mining companies to pay taxes in renminbi, a reflection of the Chinese currency’s growing clout in international trade as an alternative to the dollar.

Musokotwane said that collecting tax in renminbi “enables us to directly meet import payments and other obligations with Chinese partners”.

“In 2026, we anticipate that about 15 per cent of mining taxes will be paid in renminbi, alongside roughly 60 per cent in US dollars and 25 per cent in kwacha,” he added.