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Moody Investors Services
Moody Investors Services has upgraded the rating outlook for Zambia to stable from negative.
According to a rating action statement issued in London by Moody’s, the stable outlook reflects reduced government liquidity pressures and a slowdown in government debt accumulation.
On 24 January 2018, a Moody’s rating committee was called to discuss the rating of the Government of Zambia.
The main points raised during the discussion were that, Zambia’s fiscal or financial strength, including its debt profile, has materially decreased, susceptibility to event risks has not materially changed; and, economic fundamentals, including its economic strength, have materially increased.
Moody’s has indicated that the affirmed B3 long-term issuer rating, balances a strong growth potential boosted by ample natural resources and a young and growing population against continuing credit challenges which include a moderate debt burden, though with a very high share denominated in foreign currency, low debt affordability, and risks of further fiscal slippage.
Other challenges highlighted by Moody’s include sizeable funding requirements, a rising reliance on external debt including for local currency government securities, and large Eurobond maturities due early in the next decade.
They also stated that the government’s gradual progress with fiscal consolidation is helping to cap borrowing needs and gradually restore policy credibility.
As a result, the pace of increase in government debt from 2014 to 2015 is not expected to repeat.
Moody’s has indicated that evidence of fiscal consolidation, together with a favourable commodity price environment, fosters stability in the exchange rate allowing the central bank to ease monetary policy, and in turn contributes to support liquidity in the banking sector.
Moody’s Investor Service is a leading source of credit rating services and one of the most sought after by opinion leaders and investors worldwide.
And commenting on the development, Finance Minister Felix Mutati has said the improved outlook in the Zambian government’s rating is not only an important indicator of the international community’s discernment of Zambia’s political, social and economic stability but also an endorsement of the country’s consistent and market friendly development policies.
Mr. Mutati has acknowledged that the positive upgrade is based on, among other considerations, the critical reforms which the government has embarked on under the Economic Stabilisation and Growth Programme to implement fiscal consolidation, remove subsidies, reform the energy sector, and embark on diversification of the economy through agriculture, tourism, and industrialisation.
This is contained in a statement issued to QTV News by Ministry of Finance Head of Public Relations Chileshe Kandeta.