Zambia’s Eurobonds surged to their highest since March, when the government signaled it would restructure external debts, after Barclays Plc economists predicted holders might face losses much smaller than reflected in market pricing, reports Bloomberg.

Because of this, Zambia is likely to secure up to $4.2 billion extended credit facility from the International Monetary Fund (IMF).

The southern African nation’s $1 billion in notes due 2024 advanced as much as 2.2% to 58 cents on the dollar, extending their gains this month to 8.8%.

Zambia was among African countries that defaulted due to the COVID-19 outbreak that has seen countries spending more on health.

Since then, prices for copper, the commodity that Zambia relies on for more than three-quarters of its export earnings, have rallied, and there’s a growing chance Zambia will win support from the International Monetary Fund after August
elections, according to Barclays economists, including Michael Kafe.

That would potentially reduce the haircut for bondholders to about 20%, he said.

Zambia is planning to restructure as much as $12 billion of external borrowings, including $3 billion in Eurobonds and about an equal amount in loans from state-owned Chinese lenders.

“A debt restructuring involving moderate haircuts still seems necessary to fix fiscal fortunes, but our scenario analysis suggests considerable upside potential for bondholders,” the Barclays economists said in a note Thursday, as reported by Bloomberg.
“We believe that a circa 20% haircut to all of the country’s debt, including Eurobond holders, could be an agreeable level for all parties involved.”

Copper prices that have jumped to near-nine-year highs are giving investors hope, while the government continues to negotiate with the IMF for a loan to prop up foreign-exchange
reserves that have plunged to record lows.

Zambia is seen securing a $4.2 billion extended-credit facility from the IMF by next year, according to Barclays.

“The IMF may also demand delivery on decisive prior action, given the country’s history of dithering over unpopular reforms
during the past half decade,” the economists said.