*Zambia’s New Bond Market Rules, Policy Mechanics at FX Interplay
Zambian Social Economist Kelvin Chisanga
By Kelvin Chisanga
As Zambia introduces foreign investor participation in the local currency bonds, and as they plan to exit from Zambia’s domestic bond market, the requirements are inherently structured to be market-driven rather than instantaneous.
Unlike offshore assets, domestic bonds do not permit direct capital withdrawal. Investors must first liquidate their positions through the secondary market, receive proceeds in kwacha and subsequently source foreign currency via the banking system.
This mechanism plays a stabilising role by enforcing orderly exits and preventing sudden capital flight. However, it also creates a clear transmission channel to the foreign-exchange market.
When exit volumes are large or poorly timed, the conversion of kwacha proceeds into foreign currency can intensify FX demand and place short-term pressure on the exchange rate.
The recent policy adjustment directly addresses this risk by promoting rollovers instead of forced exits.
By allowing investors to extend maturities and reinvest locally, the policy reduces the need for immediate bond liquidation, smooths capital flow cycles and moderates FX volatility.
From a macroeconomic perspective, this shift strengthens financial market resilience. It improves predictability in liquidity management, supports yield-curve stability and preserves foreign-exchange market balance.
Most importantly, it aligns foreign investor behaviour with long-term market development rather than short-term exit dynamics, reinforcing confidence in Zambia’s domestic capital markets.
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