According to the Bank of Zambia, non-resident […]

According to the Bank of Zambia, non-resident investors increased their holdings in Government securities by K12.5 billion in Q1 2026, pushing total foreign participation to K78.3 billion.

 This development comes after Government raised the non-resident holding limit on Government securities from 5% to 23% of total issuance in January 2026 to stabilize portfolio inflows. Government argued that the adjustment would allow investors to roll over maturing instruments while easing potential foreign exchange pressure linked to large-scale capital outflows.

However, speaking in an interview with Zambian Business Times – ZBT, economic expert, Samuel Lungu warned that the inflows are being misread as pure economic confidence.

 “What we are seeing in the rise of non-resident holdings of government securities to K78.3 billion is not some simple story of confidence in the Zambian economy, it is hot money chasing yield,” said Lungu.

He further stated that foreign investors are not rushing in because they believe in long-term fundamentals, they are coming because of a carry trade window created by high interest rates and a stronger kwacha. Lungu added that the relaxation of entry limits from tightly controlled thresholds to 23% represents a fundamental shift from cautious capital management to near open-door portfolio liberalization.

 He noted that while the oversubscription of Government securities seen in treasury bills appears positive, it exposes the economy to sudden reversals if global liquidity conditions change as investors can exit quickly, sell bonds, convert kwacha back to dollars and trigger sharp currency depreciation and rising yields.

 Lungu stated that the real risk is not the inflow itself, but the absence of strong buffers, noting that the economy must prepare for a scenario where the same investors who are currently financing Government could rapidly reverse those gains.

Article by Phillip Sinkala