ZAMBIA’S GOVERNMENT BONDS FIVE TIMES OVERSUBSCRIBED, SIGNALING STRONG INVESTOR CONFIDENCE – HAABAZOKA
AN oversubscription of Zambia’s latest government bond auction signals growing investor confidence in the country’s macroeconomic direction, according to Dr. Lubinda Haabazoka.
Writing in an article published in the Daily Nation on February 18, 2026, Dr. Haabazoka explained that the heavily oversubscribed bond auction conducted by the Bank of Zambia on behalf of the government of the Republic of Zambia reflected positive market sentiment toward the economy.
He stated that a bond is essentially a loan to government, where investors are promised interest payments and repayment of the principal at maturity.
Unlike short-term Treasury Bills, he noted, government bonds are medium- to long-term instruments ranging from two to 15 years or more.
Dr. Haabazoka said government bonds in Zambia are issued by the Ministry of Finance through the central bank, which conducts auctions where institutional investors such as commercial banks, pension funds, insurance firms and asset managers submit bids indicating how much they are willing to invest and at what interest rate.
He explained that bonds serve multiple purposes, including financing infrastructure projects, supporting budget deficits, refinancing maturing debt, developing the domestic capital market and providing safe investment instruments for financial institutions.
Referring to Bond Tender No. 02/2026/BA held on February 13, 2026, Dr. Haabazoka said the total amount offered was K4.2 billion, while total bids reached K21.335 billion.
He noted that K9.879 billion was ultimately allocated, meaning investors were willing to lend the government more than five times the initial amount on offer.
He pointed out that the 15-year bond, which had K560 million on offer, attracted bids totalling K8.824 billion, while the 10-year bond, with K600 million offered, received K4.287 billion in bids.
He said this phenomenon, known as oversubscription, occurs when demand for bonds exceeds the amount government intends to borrow.
According to Dr. Haabazoka, oversubscription sends several powerful signals about the economy.
He said strong bidding for long-term instruments suggests confidence in macroeconomic stability, belief that inflation will moderate over time and trust that government will honour its debt obligations.
He added that in an election year, such demand could also signal investor approval of policy continuity and confidence in the country’s economic management beyond the polls.
Dr. Haabazoka further observed that oversubscription may indicate excess liquidity within the financial system, with commercial banks and institutional investors possibly holding surplus funds and opting for low-risk sovereign assets.
He said this situation is more likely where private sector credit growth is moderate and risk appetite toward small and medium enterprises remains cautious.
He noted that the auction’s cut-off yields ranged from 14.5 percent for two-year bonds to 17.59 percent for 15-year bonds, adding that in a declining inflation environment, such returns could be viewed as attractive in real terms, particularly for pension funds seeking predictable long-term returns.
However, he cautioned that while oversubscription is generally positive, it must be interpreted carefully.
He warned that if banks increasingly prefer government securities over lending to businesses, the economy could experience crowding out, where private sector credit growth slows.
He explained that when financial institutions can earn between 16 and 17 percent from government bonds with minimal risk, they may be less inclined to lend to small businesses and entrepreneurs who carry higher default risks, potentially affecting job creation and private sector expansion.
For households, Dr. Haabazoka said strong bond demand could reflect macroeconomic stability and support pension fund performance, while signalling confidence in long-term inflation control.
For businesses, he said sustained liquidity could eventually support lower lending rates, although aggressive government borrowing could tighten private sector credit.
He further stated that oversubscription enhances Zambia’s credibility in domestic debt markets, strengthens the case for reduced reliance on external commercial borrowing and deepens financial market development.
Dr. Haabazoka noted that Zambia has in recent years navigated debt restructuring, inflation pressures and currency volatility.
He said a bond market that is oversubscribed five times over suggests domestic investors are increasingly confident in the country’s macroeconomic trajectory.
Nonetheless, he urged policymakers to maintain fiscal discipline, ensure borrowing finances productive investments, avoid excessive domestic debt accumulation and promote private sector credit growth.
He asserted that government bond oversubscription is not merely a technical financial term but a reflection of market sentiment.
“At this stage, the signal appears positive,” he said, adding that sustained confidence would depend on continued macroeconomic prudence, inflation management and growth in real sector productivity.
Dr. Lubinda Haabazoka is Associate Professor of Banking and Financial Economics and Director at the Graduate School of Business at the University of Zambia.