Citigroup Inc. is taking a bullish stance on Zambian debt, signaling plans to go long on the country's bonds. This comes as the copper producer is anticipated to receive credit upgrades in the wake of recent elections. Specifically, Citi strategists, including Katie Kironde, indicated in a Wednesday note that Friday's local debt auction will present an opportunity to acquire Zambia's domestic seven-year notes. The auction marks the first since incumbent President Hakainde Hichilema secured his re-election last week.
Citi is also moving to an "overweight" position on Zambia on the credit side, indicating a strong positive outlook. This decision follows President Hichilema's victory, securing a second term, which is seen as providing political stability. The bank expects strong demand at the upcoming auction due to high liquidity in Zambia's financial system exceeding the available bond supply.
Moody's is expected to upgrade Zambia from its current Caa2 rating as the political outlook stabilizes, according to Citi. Furthermore, S&P Global Ratings could potentially raise Zambia's rating to B-minus in 2027, provided the government maintains its commitment to fiscal consolidation. The government is not planning to borrow from international markets until a new program with the International Monetary Fund (IMF) is agreed upon, which Citi anticipates will happen before the end of the year.
