The Zambian government has established a sinking fund for repayment of two sovereign Eurobonds it acquired, a senior official said on Wednesday.

Zambia issued its debut bond of 750 million U.S. dollars in 2012 and this was followed by another 1 billion dollars bond in 2014. The two bonds are expected to mature in 2022 and 2024 respectively with concerns that the country may not be able to repay the funds due to economic challenges.

A sinking fund is a fund established by setting aside revenue over a period of time to fund a future capital expense or repayment of a long-term debt.

Chief Government Spokesperson Chishimba Kambwili said in a statement released after a Cabinet meeting that cabinet approved the establishment of the sinking fund which was expected to run over nine years and will help to ensure accumulation of resources for the repayment of the bonds at maturity.

The move, he said, will also reduce pressure on the national budget and mitigate against foreign exchange risks, adding that the establishment of the fund will also ensure the credibility and integrity of the country on the international market.

Last week, Zambia issued a third Eurobond of 1.25 billion dollars with an interest rate of 9.375 percent, with analysts saying the high interest rates imposed on the latest bond was an indication that investors have no confidence in the country repaying its debt. Enditem


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