Saturday, April 20, 2024

Zambia gets a B+ rating from an international global ratings agency


Fitch Ratings, an international global ratings agency which provides issuer and bond ratings, has assigned the Zambia Long-term foreign and local currency Issuer Default Ratings (IDR) of ‘B+’. Zambia’s rating is the same as that for Ghana, Kenya and Angola and one step above Lebanon’s.

The Outlook on both ratings is Stable. Fitch has also assigned a Short-term rating of ‘B’ and a Country Ceiling of ‘BB-‘.

“The ratings reflect the marked improvement in Zambia’s economic performance since 2003 driven by improved macroeconomic stability, economic liberalisation, rising private investment and production in the mining sector, and more recently, a strong agricultural performance,” says Veronica Kalema, Director in Fitch’s Sovereign Group.

“The rating is also supported by Zambia’s resilience to the global financial crisis, with growth accelerating in 2009 and 2010, and comfortable external and public debt ratios, which deteriorated only slightly in 2009 before recovering in 2010.

After spiking in 2008 and 2009, inflation fell to high single digits in 2010 and the currency has been stronger and more stable since H2 2009.”

Zambia’s real GDP growth has averaged 6.3% since 2006, in line with the ‘B’ median five-year growth average and accelerated to 7.1% in 2010.

The country has healthy medium-term prospects. Growth will be driven by rising public infrastructure investment and private investment and production in the mining sector.

Copper production reached a record high of 820,000 metric tonnes (MT) in 2010, which surpassed targets, and the government expects it to reach 1million MT in 2012.

Growth will also be supported by interventions and policies to improve the business environment, which is already well ahead of the ‘B’ peer group and close to the ‘BB’ category median.

The country’s political stability should also continue to give confidence to domestic and foreign investors. Elections are due later this year.

Debt relief from bilateral and multilateral donors in 2005 and 2006 substantially reduced debt ratios. Conservative fiscal policy since then has resulted in small budget deficits and a decline in the public debt ratio to 26% of GDP in 2010, much better than the median for the ‘B’ rating category of 35% of GDP.

However, this has come at the expense of capital investment, which, at 4% of GDP since 2006 is lower than for rating peers.

The government plans to substantially increase public investment from 2011 and will make greater use of non-concessional funds. Debt projections within Fitch’s forecast period to 2012 have debt ratios remaining below the peer group.

However, the rise in non-concessional borrowing presents risks and the government would need to implement projects within the context of debt sustainability to preserve creditworthiness.

Further ahead, the increase in the tax/revenue ratio through higher mining tax revenue as the 100% capital allowance is written off earlier than anticipated as a result of higher metal prices, will help strengthen debt tolerance, improving creditworthiness.

Zambia’s external sector has also strengthened. It has had a trade surplus since 2004, which reached a peak of 16% of GDP in 2010 due to rising copper and cobalt prices and production. This has been offset by large profit repatriation by foreign mining companies.

However, the country has achieved balance of payments surpluses in most years due to high foreign direct investment (FDI) inflows. As such, gross external debt ratios remain low. A high proportion of private foreign debt is FDI related and therefore less costly. A free floating exchange rate helps the balance of payments adjustment to commodity price shocks.

Zambia’s main weaknesses are related to social and structural issues. Per capita income at USD1,200 versus USD2,700 for the ‘B’ median as well as other human development indicators are much weaker than the ‘B’ median.

Faster growth in Zambia raised per capita growth above that for rating peers in 2009 and 2010 and per capita income has tripled since 2003. Social spending is prioritised in the budget. Nevertheless, this is a longer-term rating constraint.

Infrastructure is the other significant weakness. Energy and roads are the government’s main focus. The financing constraint has been reduced by the lifting of the IMF non-concessional borrowing ceiling to USD800m in 2011, but project appraisal capacity and actual implementation capacity may constrain the pace of implementation.

Addressing infrastructure and micro reforms that would raise growth potential and improve economic diversification will be important for improvements in the rating.

The ‘BB-‘ rating for Zambia’s Country Ceiling, a notch above the Long-tem foreign currency IDRs reflects the absence of exchange controls for two decades and reliance on foreign investment which reduces the likelihood of controls being introduced.

[Fitch Ratings]


  1. Zambia forward!! with this rating,our Govt can now access funding from International Financial Markets at cheaper rates hence driving down the cost of borrowing on the domestic financial markets for our entrepreneurs.

  2. This is a historic endorsement. It will allow for the acquisition of cheaper credit from the international financial markets and allows Zambia to issue bonds internationally. Good achievement at the macro level, still more work is needed for social sectors like health, education and poverty reduction. The common man is still suffering, mean while.

  3. I do not think SATA would understand what this means am sure it would sound like a poem to him…

    WELL DONE GUYS….. welcome to the world of business Zambia is now in the league of countries above the water. Remember less that 15 countries of 53 are rated.

  4. B+ MY FOOT!! While this B+ may be flattering to people with small brains, the masses are still wallowing in poverty. No one can argue against this because poverty in Zambia is visible enough to be seen by anyone’s naked eyes. The economy can increase by whatever margin, inflation can come down by whatever margin etc…such figures or even this illusionary rating do not matter so much to the Zambian poor in Shangombo. The most important thing is to ensure that people in Mungwi have equitable access to basic services such as food, shelter and clean water. This is a just a political ploy by MMD to lure the electorate on pretext that they are working. The MMD has now gone international on political corruption.

  5. Good news. Zambia can now access cheaper credit on the international market. This is progress. More needs to be done though. This is just the beginning.

  6. #8 a little education here. How do you raise standards of living when the country is not growing. You can not distribute poverty. This was the thinking of the leaders of the 60s and 70s in Africa, where you seek to consume before production. Even in the village, you only consume after harvesting. This is the case here. Yes, there is wide spread poverty, but we can only solve it permanently when there is growth.

  7. # 11 Fifty Ngwee
    That is the thinking of Sata and his followers. They aspire one day to just wake up and find cash manee in their pockets after Sata does a 90 day economic growth spout, even though he does not have an economic plan

  8. Hard work always produces results. Its about time Zambia got rewarded with a better Credit Rate.

  9. Ignorance at its best,,wish all cud understand what this means in real micro-economic…its simply a derivative of insilence

  10. A credit rating of B+ is a very poor rating, in finance we refer to that as junk status. Anything below BBB is considered junk which means Zambia has to pay very high interest payments on loans it obtains as a result of this credit rating. This rating can be improved through the establishment of a more stable democracy which is free of violence or the threat of default on loans and bonds. Political risk rather than economic risk is the major problem in Zambia

  11. I think even a rating of B+ is better than having no rating at all. Though I do agree that there’s more to be done particularly in terms of stengthening Zambia’s institutions of good governance.

  12. #8 Voice of Diaspora…………..I have never seen a dull person like you who cant understand this simple situation. Thanx #11 & 12 for clarity.

  13. # 11 You seem to be too excited about the B+ rating. Please dont judge what the right has put across on face value. If you are in your early 20s, let me tell you that this is not the first time Zambia has scored that “well” on such ratings. Fifty Ngwee, since you seem to be more educated than everybody, tell us how long will the poor wait for the economy to grow considering that they have already done so for so long under the MMD government. #16 has put it easy for you to understand.

  14. # Iwe the so called real issue man, you are a not a real issue man but a “REAL TISSUE MAN”. So you think you are intelligent by going for the author’s dead paper opinion? I cant blame you because you seem have wrongly schooled. You are the dullest in fact, because you have taken the rating as gospel truth without without weighing the claims against other economic and social development indicators. People like you are just blind flowers of MMD full stop! Now go get a life then you will become a real MAN!

  15. #22(Voice From Diaspora)

    Quote:’..tell us how long will the poor wait for the economy to grow considering that they have already done so for so long under the MMD governmen’.

    Why should the poor wait for the economy to grow WHEN they should be the ones to make it grow? I think that’s where we get it wrong and whereas the economy is growing, the majority of Zambians are ‘waiting’ while the foreigners are seizing every opportunity and making billions.Socialist mentality is killing us and its sad that its being handed down to the next generation.

  16. Why should the poor wait for the economy to grow instead of being the one to make it grow? Well, thats a very god question Sharp Shooter but I think this question begs more questions than answers. First of all one needs to analyse the condition of the majority poor people in Zambia and their capacity to be able to engage in any sector. I have worked in rural communities and have seen the hardships they go through through. For instance, how can the poor participate in growing the economy if feeder roads are unusable to transport inputs and produce since most rural-based poor predominantly involved in agric? How can they do so if agric inputs such as fertilizer and seeds are inadequate or disposed off late by government? Wait!!

  17. Since independence, copper has been the major stimulant for our economy but calls for economic diversification have made sense because relying on copper alone has proved to be unsustainable. One key sector is tourism and provided there are pro-poor incentives, the poor can surely participate in growing the economy but you and I know that their access to funding or loans from commercial banks is limited because they dont have the necessary security deposits(collateral ) which banks demand and besides interest rates are relatively high for the poor….so how can they participate? Banks tend to favor foreign investors who after making profits leave the country. We cant go on like this as a nation. This is why such ratings are a”shallow reflection” of the economic reality in Zambia.

  18. Since independence, copper has been the major stimulant for our economy but calls for economic diversification have made sense because relying on copper alone has proved to be unsustainable. One key sector is tourism and provided there are pro-poor incentives, the poor can surely participate in growing the economy but you and I know that their access to funding or loans from commercial banks is limited because they dont have the necessary security deposits(collateral ) which banks demand and besides interest rates are relatively high for the poor….so how can they participate? Banks tend to favor foreign investors who after making profits leave the country. We cant go on like this as a nation. This is why such ratings are a”shallow reflection” of the economic reality in Zambia.

  19. #25, how can the feeder roads, in the rural parts you have worked, be improved if there is no strategy for finance them? Those roads need finances and this rating has increased the capacity to get finance in order to address your concerns.You sound like someone who complains about failure to progress his education for lack of funding but does not support a strategy to finance that education. All the projects you cry for need funds, you should be happy when access to funds increase. You sound like you merely oppose as long as something has happened in RB’s government. Be Objective in your contributions.

  20. Such ratings are just a ploy to make developing countries like Zambia and Kenya be in their “comfort zones” yet indirectly such global agencies are the ones in the forefront of lambasting our countries’ as being economically backward and poor. “ZAMBIA WILL NOT FLOURISH ON ACCOUNT SUCH FACTIOUS INTERNATIONAL PRAISES. HOME GROWN RATINGS IN MY VIEW WILL REFLECT THE VOICE OF THE POOR AND HOW WELL OUR ECONOMY IS GROWING”. So there is nothing to be excited about this B+ rating!

  21. Last time was home,I had the privilege of visiting my cousin in the Village and I was shocked at the strides he has made.He is a peasant farmer and grows staple(maize,millet etc) as well as cash crops like cotton and tobacco.This time he has build a pan-bricked house with cement and even bought livestock.I inquired from him the magic he was employing and the answer was simple.He told me they have formed a cooperative which accesses money from the CEEC and distributes it among members.And the same cooperative receives fertiliser thru FSIP and can be bought with cash or on credit at a subsidized price.This time,his life has improved cos no longer get the farming inputs on credit but cash citing exploitation from some suppliers during harvest time especially Cotton dealers.

  22. With due respect number # 25. Contrary to you sentiments, I argue that the strategy for finance has always been there. What Zambia has lacked over years is the “political will” by government to be able to implement and am not only referring to RB government here. I am not complaining about my education because I am comfortably more than there and neither am I opposing just for the sake of it. Zambia should in a position to improve feeder roads and support the poor to engage in tourists with own funding. I wish to underscore here that MMD government doesn’t seem to a comprehensive strategy in place to be able to manage international finance and this is why our debt burden is slowly creeping back to the previous crisis. Mark my words!

  23. from#30
    This to me was inspiring cos this cousin of mine is a grade nine.Problem is everybody wants to be employed and by the Govt for that matter.To us economic growth should be private-sector driven and much as there is poverty in rural areas,the rural people especially where I have are taking a leading role especially in agriculture cos they understand that its them and NOT the Govt that has to put food on their table.And if the govt could double funding in rural areas,food security will be guaranteed and some unemployed hardworking people in urban areas may opt to go and do farming and to me this is some real empowerment.

    It is important to recognise these achievements.
    When you are travelling from one town to another, an increase in speed by the driver does not mean you have arrived, and if you have not yet arrived cannot be a basis to argue that speed was never increase if it was.
    The fact is that however much the economy improves at macro level, for it to show at micro level many principles have to be at work.
    Zambia is a country with high level unjustifiable urbanisation. People leave the rural areas into town and from shanties around town yet with not education and doing nothing, instead of contributing to agric in the rural areas. How does the macro economic indicators translate into their individual benefits when the are doing nothing? Money must be earned whether in…

  25. Without doubt such success stories as your cousin are positive and can significantly contribute towards growing our economy. Such stories are however not that many. Your cousin is just one of the few. I wish we had updated statistics to be able to argue debate properly. In my previous work in the Northern province, I worked closely with community based cooperatives in Mungwi, Mbala, Chinsali were people have come together to engage in such activities as rice growing, bee keeping and honey production, Jatropa production etc. Capacity in these cooperatives is gradually being built in terms of production and marketing but unfortunately most of these coorparatives have not been able to access funding from the provintial CEEC office in Kasama due to cumbasome guidelines which requires reform

  26. A or B makes no difference if the growth does tricle down to the bottom of the pyramind.
    Zambia is always borrowing for consumption rather than things that will accelerate development and in the long run pay back.
    Zambia needs to take advantage of such reports and focus on the weaknesses or areas of improvement. These must be viewed as challenges and MUST be mainstreamed in the system AQAP.
    We have a poor record of non implementation of recommendations and this is big problem in this country.
    rheotoric speaches and empty promises is the order of the day.
    We thank the ratings but let us adopt the pay as you go concept rather than borrowing all the time.

  27. Again we you look at the paraphrased category below it says that
    “An obligor is MORE VULNERABLE than the obligors rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments”.

    We are still miles away to reach the desired rate.
    Our economy is not stable because it is commodity driven therefore anything could go wrong any time——already you could the fuel surcharges, electricity and many other indicators could pludge us into lower rate.
    God BLESS

  28. I think most of you don’t understand how credit ratings are measured. Its not like secondary school. B+ is one of the worst scores. It Is junk status which means the risk of default or failure to repay is high, hence the high interest rates Zambia has to pay. At the top is AAA+ then AAA, AA+,AA,A+,A,BBB+,BBB,BB+,BB, and then B+. Check standard and poors or Moodys index, i’m a qualified financial analyst, i know what i’m talking about. B+ is at the very bottom.

  29. #37 successor ,

    A number of people here, including you, think they understand how credit ratings are measured.

  30. #38 i’m very civil in my discussions and i assume you also are and we can have a decent conversation, can you explain to us the framework that governs credit ratings then as well as how they are determined as well as the variables that are used to make the assesment. Can you also explain to us the various credit rating agencies as well as the various grading systems they use and what each of those grades mean, also tell us when a specific grade reaches junk status, also tell us what the implications of a credit rating are depending on what the credit rating is, tell us about the capital markets and how the credit rating of a country or company for that matter affect its cost of capital as well as access to the international capital markets.

  31. #40 successor.

    You said and I quote,

    “#37 successor says:
    I think most of you don’t understand how credit ratings are measured”

    Then I also quote myself,

    “#37 successor ,
    A number of people here, including you, think they understand how credit ratings are measured. ”

    You will realise that what I was correcting here is the attitude of belittling others and thinking that knowled belongs to us and not others.

  32. As patriots !! What have we done for Zambia or contributed to development. Don’t wait for the government to do everything. This is a collective journey for all Zambians to make a difference. Don’t ridicule the progress Zambia has made, while you sit down doing nothing for your country. Such thinking derives from ridiculous pride. This blog or subject should not be about what Qualifications bloggers have.

    Zambia borrows $200m from IMF or W/Bank @ 6.5% Interest.

    Zimbabwe borrows $200m IMF or W/Bank @ 21.5% Interest.

    which of these two is better off?

    When we borrow at low interest rates, it means more money will go into Development vehicles and reach out to the poor.

  33. Mr Fine #44, i stand by my initial statement because the B+ rating was being misrepresented as if it were a high school rating. You however as a micro economist or macro economist that you presented yourself to be have not given a plausible argument worth considering, we’d like to see a little more intellect and depth on the arguments you’re putting forward so that if there’s a rebuttal i can think it through, regards..

  34. #46(Successor)
    Coming from nowhere,I believe a B+ for Zambia with no track record on the the International Financial Markets is a plus,if Zambia was a seasoned player and has been downgraded to B+,then you and me can complain.
    Tell me, do Moody’s, S&P 500 and Fitch have the same standard credit rating? I mean using the same symbols and corresponding meaning?

  35. 37 SUCCESSOR

    You are misleading bloggers. I work as an Equity & Derivates Trader in London.

    Part on my work is to analyse Credit Ratings of an organisation, company before I buy securities/shares into a company or execute mult-million pound trades. We asses Credit Ratings as indicators & benchmarks or whether the money owed can lead to defaults, which can lead to company loosing market credibility

    There are factors that have an effect on these things such these

    Defaults || Preferred Dividends || Repayment Principles || Insurance Claims || Counter Party Obligations || Risk

    Plus many more factors that can be derived from Fundamental Analysis

  36. cont..from 48#

    The above is similar method used to grade a Nation. Among the other thinks considered are

    || Defaults || Risks || War tone Zones || Speculations || Short Term & Long Term Commitments || Structured Finance || Repayment History || GDP

    Moreover, the list goes

  37. Does Sata understand the meaning of this? HH may understand, but he plans to use the information for Tongas only!

  38. 1. RB is an Economist & I expect him to understand what 48@independence Observer has explained
    2. HH has an MBA & I expect him to understand

    3. NAWIKWI is intelligent & educated to reason too
    4. MIYANDA though a miltaryman – the man has wisdom & common sense

    3. *** SATA is a Policeman and the only thing that he know is to arrest, torture, insults, brutality, rational thinking & 90 Days Wonder.

    The choice is your Zambia in 2011 ………………………….

  39. .
    48 49 independent observer

    thanks for explaining. some people above your comments just want to say things without backing up what they are vomiting. So much of being a Qualified Financial Analyst

  40. VOICE FROM DIASPORA, one thing that has impressed me about your blogging is to see a PF cadre exhibit some knowledge of economics and finance, albeit heavily twisted to suit. I am not saying that you are a card carrying PF cadre, but PF cadre is now various and loosely defined as “someone who argues over nothing; someone who knowingly argues with twisted facts; someone who contradicst himself everyday; someone who does not know what he is talking about; someone who takes pride in deception; someone who supports Sata”. You should be one of the above.

  41. LT, are you sure Fitch rated Zambia B+? Fitch doesn’t have a B+.
    Fitch’s ratings are:
    AAA: Highest credit quality.
    AA: Very high credit quality.
    A: High credit quality.
    BBB: Good credit quality.
    BB: Speculative.
    B: Highly speculative (‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment)
    CCC: Substantial credit risk.
    CC: Very high levels of credit risk.
    C: Exceptionally high levels of credit risk.
    D: Default (defined as failure to meet obligations)
    @47 Sharp Shooter, no Moody’s & S&P have similar ratings except that on some ratings S& P uses + sign while Moody’s uses…

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