Fitch Rating agency has revised Zambia’s long term outlook to Stable from Positive but affirmed its ‘B’ rating.
The agency also noted that policy coherence and credibility are weak and a growing constraint on the rating.
In a statement, Fitch further expects growth to slow to 5.3% in 2015, down from 6% in 2014 and 6.7% in 2013, but still above the ‘B’ median of 4.2%.
It said growth could slow further if copper mines are forced to close, due to the new mineral royalty tax and lower copper prices, aggravated by high operating costs adding that a faltering mining sector would have negative spill-over effects on the broader economy.
The agency says numerous policy decisions since 2012 – most recently changes to the VAT regime and mining taxes – appear to have been legislated without widespread private sector consultation and have contributed to weakening the business environment.
‘In the 2015 budget, the government changed the tax regime for copper mining companies, introducing a mineral royalty tax – a tax on production rather than profit,’ it said.
It added that the new tax could undermine the viability of certain mines at current low copper prices.
‘Although the government has committed to negotiate with mining companies, changing the tax regime without adequate consultation has resulted in significant uncertainty in the sector and contributed towards a delay in foreign investment,’ it observed.
The agency observed that an IMF Mission is expected in March 2015 but it does not expect that a deal will be reached ahead of the elections in September 2016.
‘Zambia’s vulnerability to external shocks has increased, due to lower copper prices pushing the current account further into deficit and declining reserves, which Fitch expects to fall below three months of import cover in 2015,’ it said.
Fitch also forecasts a deficit of 3.5% of GDP in 2015, up from 2.6% in the previous year adding that with the current account recording a deficit for the second consecutive year in 2015, it expects the authorities to seek between USD600m and USD1bn in external concessional funding to finance the balance of payments deficit or risk a sharper fall in reserves.
It noted that downward pressure on the Kwacha, which abated in the second half of last year following the prospects of an IMF programme and tighter liquidity, appears to have regained momentum.
The Kwacha has fallen by 9% against the dollar since the start of the year, following a 13% depreciation in 2014.
Fitch also forecasts a deficit of 5.3% of GDP noting that fiscal risks arise from potentially repaying VAT arrears, revenue underperformance due to low copper prices and unforeseen consequences of the new mineral royalty tax, ongoing subsidies and increased spending ahead of the 2016 elections.
Those are the indicators of the foresight of our economic planners we have in the country. The buck stops at the feet of the voters, who have given them the jobs.
You can not plant maize and expect to harvest rice, the laws of nature are laws of nature which govern the way things work everywhere! You can pray all you want, to the enlightened, the results are all too predictable! PF is destroying everything, from national cohesion, the rule of Law, democratic processes and everything else in between. Having done that you somehow in your greatest wisdom expects to reap a thriving democracy, a health and productive society and economic development? Good luck rewriting the laws of nature Zambia, good luck!
I am shocked at how bloggers dodge to comment on serious economic issues like this one, and most of those who comment resort to making political rather than economic ones.
The article is way above the comprehension of most bloggers.
This shows low caliber understanding of the economic planning, performance and future outlookby most Zambians.
I will be shocked if there will be more than 20 comments on this article.
Gen, this article just echoes what we always say about how ignorant PF are when it comes to matters of fiscal policy and basic economics. Go through all other stories where we expound these points to highlight the haphazard way your PF is running things and I am yet to see a coherent response from PF cadres to counter our points. All you people say is ‘You are bitter, ifintu ni lungu bla bla bla, so what the heck are you crying about here when PF are the dull and ignorant ones??
Sadly our ambitions end at german car, 2 storey house, wife and 2 girlfriends. Development is a tarred road in mandevu and a bigger “town” (to SHOP and drink more beer). Meanwhile universities in kenya, egypt, nigeria, SA are producing PHDs. We just want a big “town” & in lusaka. Zambians lie to selves – we are the most educated in Africa. U believe that? How many scientists, engineers, microbiologists graduate each year?
Zambia needs ambitious leaders to create a model and modern AFRICAN society developed on AFRICAN terms, confident and holding its own anywhere in the world. AFRICAN throughout. Minus that let’s wait for Jesus return for “the poor shall always be with us” Let’s enjoy shopping we r mere markets 4 chinese stuff. Afterall we just want to be cool dance to Naija…
Signs of an economy in a downward spiral. The economic indicators are not positive for zambia.
1. Our dependence on Copper is no longer feasible, and this we have known for a long time now. We cant control the market still.
2. The diversification of the economy to agriculture and Tourism has been a song for a long time but impementation is still a wish dream.
3. The inconsistent Govt policies are a recipe for unstability in a fragile nation like ours. The only time i saw consistent, persistent, well thought out and progressive policies was in the time of late Mwanawasa.
4. The arresting of the free falling Kwacha right now will be an uphill battle because our economic planners seem to have run out of ideas. It all starts with policies.
5. The president has no vigour and…
I don’t care what people think of Kaunda but there has been no economically ambitious government in Zambia since UNIP. Chiluba bought into trickle down nonsense, selling most of zed’s economy to foreigners living zambians with nothing. Him and his crew thought that would miraculously transform Zambia but the unintended consequence is that today Zambians cry of foreign europeans controlling mining and other businesses. Sadly no government has placed ambitious and aggressive economic and social management plans to prosper locals. Our ambitions end at 3 series BMWs, double storey homes, multiple girlfriends and that is just sad. We make for nice breakfast for Europeans and Asians, even west africans and kenyans. Bigger ambitions building on natinal miling, unza, uth, Tazara, are needed now
This is happening the world over without the exception of Zambia. These are not permanent conditions. the economic outlòok shall rebound in the second annd third quartrs. Viva Edgar
It’s only happening to those who lack foresight! You can’t justify your sh!t by simply saying everybody is in sh!t
That’s absolute rubish !
Probably the most logical observation I have read. Canada and most economies that heavily rely on commodities are experiencing a slowdown in growth. Their currencies are also weakening as the USD strenthen.
In short Zambia’s credit score is poor, rather Zambia is not reliable anymore.
“These Fitch should have consulted with the PF secretar General Hon. Chama before making a statement. They must be working with the cartel. We are mobilising our cadres to go & close there offices.” Sunday Chanda
What does chama know u oratung? Just look at chikwanda. What a waste of time. He doesn’t know anything. So useless
You are missing the point jamakundi, itizi turu has merely made satire of situation. Read between the lines.
The.financial management has been very poor. The priority to invest in building univerties, hospitals and roads was poorly thought out. We should have invested more in diversifying the economy bring more agriculture in it. But the pf have consistently created problems in that sector. If have universities you cant fund, hospitals you cant staff what will be the result? If we strengthen agriculture great we may not have all roads but we have enough. Let productive guide were we put universities and hospitals. Not hope and guess work. Our dependency on copper is creating alot issues. Poor plannin isn’t helping.
Seriously investing in education and health is a waste of resources? These will pay off in the long run. A healthy and educated public will serve our country better. There is no economy in the world that grows in perpetuity even the Chinese economy has slowed down
Country economic planning is different from the mere politicking we are seeing from the present politicians of belly .
We need to start thinking outside copper. Copper is well within our feasible margins but we need our own people to extrapolate on how much to increase production on other sectors like Agriculture, Tourism, Manufacturing and Processing industries in order to attain satisfactory or national utility levels. We need to invest in productive sectors other than consumption and empower locals to ensure money remains in this country.
That cannot happen in Zambia in its present shape and form. You need selfless leaders like the kagame type. Not these clueless occupants called Pf. JUST FORGET. ZAMBIA IS GOING DOWN. THANKS TO “POKO FARAM” (PF).
Government needs to foster Public Private Partnerships than single handedly anchoring large capital projects. This should help cut on costs and loan repayments and save our foreign reserves.
Are you prepared to pay heavy toll fees?
Pf are the worst thing to happen to Zambia. If only there were a govt that continued from where Levy left in terms of policy consistency and economic mgt, this country wud have been much better. RB messed up and sata the clueless tribalist just destroyed. The devil comes to kill, steal and destroy the bible says. These attributes befit Rb and sata. As for Lungu, just the same. He is hybrid of sata and rupiah. Don’t expect anything from him. In fact much worse. I just wish a “Paul Kagame type” could emerge in Zambia.
Zambia Inflation Rate at 7.40 percent
Zambia Interest Rate at 12.50 percent
Zambia Population at 15.02 million
Zambia GDP at 22.38 USD Billion
Zambia Balance of Trade at -81.90 Million Zambian Kwacha
Zambia Exports at 5268.00 Million Zambian Kwacha
Zambia Imports at 5350.00 Million Zambian Kwacha
Zambia Food Inflation at 7.40 percent
Zambia GDP per capita at 821.56 USD
Zambia Unemployment Rate at 15.00 percent
Zambia GDP Current Prices at 125947.00 ZMW THO
Zambia Sales Tax Rate | VAT at 16.00 percent
Zambia GDP per capita PPP at 3079.33 USD
Zambia Current Account to GDP at -2.00 percent
Zambia GDP Annual Growth Rate at 7.10 percent
Zambia Government Debt to GDP at 34.10 percent
Zambia Government Budget at -7.30 percent of GDP
Zambia…
Zambia Current Account at 67.50 USD Million
Relate that to counter parties like China and US in rating graphing or charting and see charectreistics of ratings as they relate to common national indictors
e,g
Data for Zambia Credit Rating
Zambia vs US – Credit Rating
Zambia vs China – Credit Rating
Zambia vs UK – Credit Rating
Zambia vs Euro Area – Credit Rating
Zambia vs Japan – Credit Rating
Zambia vs Australia – Credit Rating
Its true but though not a foregone conclusion that the roller risk in Zambia sovereign Bond is quiet high and Zambia ranking 3rd amongst the world
Lets seal the credit matrix evaluation model in those indicators and ensure other soft issues like political and leadership is worked on
If you plot the numbers in GDP against above to insulate the ratings and fit in the decision the options are good but not so good especially as they relate to sovereign debt rollover and its a key decision criteria by either ratings agency
Just the kind of bloggers we need to see here, thanks Jonathan. Maybe the drunkards blogging from Zambia will learn a thing or two from you and that is if they take time to read before typing PF defenses.
People like jamakudi suffer from a “pathetic fallacy” syndrome. WQith that kind of attitude, i would not be surprised if you are a slum dweller! Positive mindset and sorting challenges that come our way is what makes humanity to survive. We cannot afford to have a “mulungu eka ndiyeaziba” attitude otherwise we are doomed. No wonder everything is GOVERNMENT fault because you cannot think outside the box. Get a life!
@ Kamanga. Munajaila vamahala!If you can afford the cost of your salaula car then you should be prepared for the costs that come with it. PPP is the way to go and that also empowers the private sectors with numerous viable projects.