ASINT / Macro Strategy
From default to buyback in five years
In November 2020, Zambia missed a $42.5 million Eurobond payment, becoming the first African country to default on its debt during the COVID-19 pandemic. By November 2025, Zambia had reached restructuring agreements covering about 94% of its $13.3 billion external debt and unlocked more than $1.6 billion in IMF funding under its Extended Credit Facility. Fitch and S&P both upgraded Zambia’s long-term foreign-currency rating from Restricted Default and Selected Default respectively to Stable, marking the country’s first upgrades since 2020. The government has since launched a buyback of more than $1.3 billion worth of Eurobonds. Global rating agencies now rate the country at the low end of investment grade with a stable to improving outlook. Inflation cooled from about 14% across 2025 and 11.2% in December to 6.6% in May 2026, back inside the Bank of Zambia’s 6-8% target band. The buyback operation converts the language of the recovery from passive to active: Zambia is not simply complying with restructuring terms, it is returning to the market as a sovereign that chooses when and on what terms it retires its own obligations. That distinction is what the words active debt management rather than drift are designed to signal to international investors assessing whether the 2020 default was a structural failure or a crisis management episode.
The copper equation and why it cannot be avoided
The Zambian kwacha lost more than 97% of its value against the US dollar between early 2020 and early 2026. With 60.28% of the country’s debt portfolio denominated in foreign currency, every kwacha depreciation cycle fed directly into a larger domestic-currency debt burden. Mining contributed 13% of GDP in the third quarter of 2024, and copper accounted for between 70% and 75% of total export revenues during the default period. Consequently, the commodity which most needed investment to grow was also the one whose price weakness had contributed most directly to the fiscal collapse in the first place. Copper prices hit record highs above $13,000 per metric ton early in 2026 on demand for electrification and AI infrastructure, then turned volatile amid Middle East tensions and ample supply. Most analysts expect prices to soften through late 2026 before climbing long term as demand outpaces supply. The copper deficit of 150,000 to 590,000 tonnes documented in this series, driven by AI data centre demand and the EV transition, is precisely the supply-side gap that Zambia’s 3 million tonne production target by 2031 is designed to fill. The investment case for the borrowing strategy is coherent: borrow now at post-default pricing while copper is above $13,000, invest in production capacity, and repay the debt with the copper revenues generated once the capacity comes online. The risk embedded in that logic is the same one that made Zambia’s 2020 default structurally inevitable: the commodity cycle is not controllable, and a production ramp-up that takes five years to deliver coincides with price movements that five-year projections systematically misjudge.
What the new borrowing is financing
Each major investment now being deployed in Zambia functions as an enabler of copper production at a different point in the value chain. The Lobito Atlantic Railway reduces logistics cost and transit time for copper concentrate moving from the Copperbelt to Atlantic ports, addressing one of the primary competitive disadvantages Zambian producers face relative to Chilean and Peruvian peers with direct Pacific access. A 900 megawatt energy portfolio targets the chronic electricity deficits that have historically forced Zambian smelters to operate below nameplate capacity, a constraint that caps copper output irrespective of ore availability. The Leopards Hill solar-plus-storage project contributes both grid stability and ESG compliance credentials that Western copper buyers increasingly demand as conditions of long-term offtake agreements. The infrastructure investment structure is the evidence that this round of borrowing is qualitatively different from the 2013 to 2020 debt accumulation that produced the default. The earlier cycle financed a combination of infrastructure, white elephant projects, and current expenditure funded through dollar-denominated loans without a corresponding revenue-generating asset to service the debt. The current cycle is documented to specific production-enabling investments: logistics that reduce the cost per tonne of copper shipped, energy that allows smelters to operate at nameplate capacity, and ESG infrastructure that satisfies the offtake conditions that European and American copper buyers require. First Quantum’s $1.25 billion Kansanshi S3 expansion and Barrick’s $2 billion Lumwana modernisation documented in this series are the industrial capital that the infrastructure investments are designed to enable. Local content requirements at 20% documented in this series add a domestic economy linkage that the previous borrowing cycle did not produce.
The structural question the cycle cannot resolve
Analysts caution that borrowing alone will not deliver durable growth. The government must use the breathing space created by concessional loans to broaden the revenue base, reduce reliance on copper, and limit exposure to global commodity price swings. The IMF projects that if Zambia remains on its current policy path, economic growth could average about 5.6% between 2026 and 2031, supported by higher investment, improved electricity generation, and stronger agricultural output. The trade-off of the buyback is about $1 billion spent now that cannot go to roads, schools, or clinics. Zambia is choosing a known cost today over a potentially larger cost tomorrow while backing its own recovery. The structural question the borrowing strategy cannot answer is the one that Zambia has faced since the 1960s copper boom: whether a commodity-dependent fiscal model can generate the diversification capital required to reduce that dependency before the next price cycle produces the next fiscal stress. The ISS Africa analysis identified that Zambia’s recovery shows the potential of well-coordinated reforms and international collaboration, but that long-term success depends on economic diversification, improved governance, and enhanced resilience to climate change. Reducing Zambia’s dependence on raw copper exports is critical. By investing in local smelting and manufacturing, the government can capture more value from its natural resources, particularly copper and cobalt. The local content law documented in this series is Zambia’s current legislative answer to that diversification requirement. A 20% local procurement threshold that rises to 40% over five years converts some of the copper production investment into domestic supplier development. Whether that threshold produces the local manufacturing base that actually reduces commodity dependency, or simply increases the share of domestically sourced consumables bought by mines that remain structurally copper-export operations, is the test the next five years must answer. The debt is active management. The diversification is structural ambition. The gap between the two is Zambia’s recurring challenge, stated in 1998, restated in 2020, and still open in 2026.