Moody’s, a provider of credit ratings, research, and risk analysis, yesterday assigned Zambia’s local- and foreign-currency issuer ratings of B1 to the government of Zambia. The outlook on these ratings is stable. The B1 ratings reflect the following key factors: 1) Expectation of continued rapid growth, which should support economic diversification and over time increase the country’s low wealth levels. 2) The country’s track record of political stability, which benefits its developing institutional strength. 3) Zambia’s low albeit improved financial strength, following debt forgiveness from official creditors in 2006..
Below is the full Report
Moody’s has today assigned local- and foreign-currency issuer ratings of B1 to the government of Zambia.
The outlook on these ratings is stable.
The B1 ratings reflect the following key factors:
1) Expectation of continued rapid growth, which should support economic diversification and over time increase the country’s low wealth levels.
2) The country’s track record of political stability, which benefits its developing institutional strength.
3) Zambia’s low albeit improved financial strength, following debt forgiveness from official creditors in 2006.
At the same time, Moody’s has assigned Zambia a Baa3 local-currency country risk ceiling, which is the maximum credit rating achievable in local currency for a debt issuer domiciled in that country.
Moody’s has also assigned Zambia a Ba2 foreign-currency bond country ceiling and a B2 country ceiling for foreign-currency bank deposits. These ceilings are lower than the local-currency ceiling as they also capture foreign-currency transfer and convertibility risks.
RATINGS RATIONALE
The first key factor underlying Moody’s assignment of a B1 rating to Zambia is our expectation of a continuation of the rapid economic growth that the country has enjoyed in recent years due to buoyant global copper prices and production, combined with growing foreign direct investment (FDI).
Moody’s expects Zambia’s economy to grow by 7.3% in 2012, up from 6.6% in 2011, on the back of strong growth in copper and agricultural output, in addition to the government’s expansionary fiscal stance. GDP growth averaged 6.5% over the past five years, reaching a peak of 7.6% in 2010.
Zambia’s strong economic growth performance however is balanced against a low per capita GDP on a purchasing power parity basis, relative to its B1-rated peers, and an undiversified economic base in which subsistence agriculture accounts for around 70% of employment.
The second key factor supporting Zambia’s B1 ratings is the country’s track record of political stability which, in turn, benefits its developing institutional strength. This was highlighted by the peaceful transfer of power to the current administration last year, following two decades of political dominance by the previous Movement for Muli-party Democracy government.
Moody’s expects the current government to continue to implement prudent macroeconomic policies, with an emphasis on attracting FDI, alongside a commitment to increasing employment and improving social conditions. However, structural constraints such as widespread poverty continue to hinder the country’s institutional development, as reflected in its relatively low scores on the World Bank’s indicies for ‘government effectiveness’ and ‘rule of law’.
The third key factor underpinning Zambia’s B1 ratings is our expectation that the government’s low financial strength will continue to improve. In 2006, the country benefited significantly from an official debt forgiveness initiative. General government debt as a percentage of GDP stood at 26% in 2011, compared to 88% in 2005, a year before debt forgiveness.
Although the current government is committed to a policy of fiscal prudence, the country faces significant spending pressures due to public-sector labour demands for higher wages, social spending needs and large-scale infrastructure requirements. In April 2012 for instance, the government granted higher-than-budgeted increases in basic salaries to government workers. Moody’s expects Zambia’s to post a budget deficit of 4.1% in 2012, compared to 3% in 2011.
RATIONALE FOR STABLE OUTLOOK
The stable outlook on Zambia’s B1 ratings reflects Moody’s expectations of continued high economic growth and the maintenance of a prudent macroeconomic policy framework.
WHAT COULD MOVE THE RATINGS UP/DOWN
Moody’s would upgrade Zambia’s ratings if the government’s economic reform and investment programmes were to lead to a material increase in economic diversification and employment. A significant improvement in Zambia’s institutional strength would also exert upward pressure on its ratings.
Conversely, Moody’s would downgrade Zambia’s ratings in the event of a sustained drop in global copper demand and prices, resulting in a significant deterioration in the government’s fiscal imbalance and the country’s external position.
Crap…Moody’s must have been bribed from the $750m bond money by Sata and the Bembas to come up with a “good” rating to help their bumbling grade7 president look competent.
How does this put food on my table ?we are tired of these economic figures.
it will not, no one will put food on your table if you don’t work for it!
Number 2, check there fufu on the table already
@1 lets not politise everything, please do a research on the long term benefits of rating do not just yap yap.
Are you directing that at chi #1 or are you talking to Sata? I’m more convinced its Sata because he just yapped & politicised every rating in RB’s time. and to be honest chi #1 has less impact than Sata.Lets stop the hypocrisy.
This a plus for the PF Government and reaffirms the international community’s confidence in the experienced leadership of the President. Zambia is on course to achieve prosperity and transformation under the PF Government. The PF manifesto is being implemented letter for letter into pro-poor policies that will ensure that the people has the neccessary skills to drive the national development agenda.
matuvi rating
this should translate into more food on the table and money in our pockets
Iwe chi Mu Sungwana what is your problem. Dont be moody about our government OK?
Unless under MMD,this could have been good news to you people.
Mu sungwana please dont bring tribal issues in everything.You are showing a serious levels of foolishness.You should to give credit where it belongs.It will not pay or put HH in power by insulting bembas every time.It is better to shut your trap if you are ignorant about the subject than just yapping bemba this bemba that.It is this attitude that will make your president remain the opposition forver!!
Sata ale Kontral situation
Whether up or Down rated the PF government should not bother. Theirs should be working hard to improve the Zambian economy through diversification and fighting corruption.Â
From the look of things, I can see Zambia changing for good. PF , please work for the good of Zambia, ignore those who were born bitter, frustrated and haters to rot in their insipid pomposity.
Peace and Prosperity to Mother Zambia.
Please people, we need to look beyond what appears to our eye’s. Whichever tribe we come from does not matter, what matters is that we are the same in God’s eye’s period! This tribal thing brings about divisions which would result into genocide. If we are not careful, we might start going that route.
There is a crop of Zambians who have developed proponsity for bad news for the country, that is what makes them hapopy, because it sustains their narrative of Zambia headed for doom and therefore justifies their call for political change, basically to bring their so called economic manager with PLANS to govern the country. Why should a positive and objective rating from an international organisation annoy you so much??? They have given reasons for their rating and you need to agree we have political stability here, we only change governments through elections and you have to wait for 2016! But going by donations of 25 cows and promises of 70 million for people of Mufumbwe to party, I doubt your chances!! Cheque book political manouvers are long gone, people know you cant feed them !!!
The same way you and your people rubbished all the positive news that came during the RB regime such as bumper harvests, low inflation, infrastructure development and massive foreign direct investment. In fact it can be argued that this rating has its foundations in the previous regime not this tribal hegemonic cnp regime led by a sick  tribalist  who still cant control his libido.
Haha,so much hypocrisy Sansamockening.Isn’t that an exact description of Sata and his minions during RB’s time? Clear the unrepented historical log in thine eyes first.
@10 Sansamukeni, That’s how low the youth of today have stooped.
Rubbish! Only retards can be cheated!
Fifa rated Zambia God knows where but we still won the African Cup…these ratings shouldnt go to our heads, but instead we should look to ourselves to develop Zambians flourishing lifestyles…we shouldnt look to others to tick our achievements but should instead concentrate on how best to protect our people and develop our nation, our people wont eat B1 or A1 for that matter-they dont even understand what this means…we have been laughed on for toooo long. Time for Africans to take advantage of Africa in the current change of economic winds!
Moody’s, also constantly gave high ratings to USA banks that contributed to the 2008 global financial crunch. Of course they can easily deceive a third world country.
# 1, how is this a bemba thing? Zambian are we so tribalist that we are seeing everything with tribal lenses. I wonder if the amount of tribal comments I see online is a true reflection of the entire country. If indeed it is then it is such a huge shame and we ought to be ashamed of ourselves
When Zambia was given B negative you were singing Chimbwi no plan . Now we have a plan your doubting the agency credibility. You cannot have it both my dear
B+ or what ever it makes no difference to me. Pound and dollar are sky rocketing now at 8250
Its hard to explain the laws of economics to a poor uneducated man. These ratings don’t feed you, they indicate how well the country is doing as an investment destination for FDI’s (foreign direct Investments). How can you benefit?; get your lazy ass up and work!!!
THIS RATING IS HOW THE INTERNATIONAL WORLD IS LOOKING AT ZAMBIA ECONOMICALLY.IT IS A RESEARCHED DATA AT A GIVEN TIME.OFCOURSE IT WILL NOT PROVIDE BREAD AND BUTTER AT THE TABLE OF EVERY ZAMBIAN BUT TO THOSE THAT ARE IN PRODUCTIVE WORK.IF YOU WANT TO SHARE THE BENEFIT , WORK UP AND WORK.WHO GETS THE PRAISE,PF AND ITS GRZ AS THEY ARE THE PEOPLE WHO GET THE WHIP IF THINGS GET BAD ON BEHALF OF THE PEOPLE OF ZAMBIA.PLEASE NOT THAT JESUS SAID””THE POOR WILL ALWAYS BE WITH YOU””. AS THE LAZY PEOPLE WILL ALWAYS BE WITH US.I TELL YOU, EVEN IF ONE DAY IT WILL RAIN AMERICAN DOLLARS IN ZAMBIA ONLY ONE DAY,SOME PEOPLE WILL BE POOR.SO LET US BE POSITIVE.AS ZUMA WOULD SAY,””DON””T TALK ZAMBIA DOWN””.BRAVO ZAMBIA FOR YET A PLUS B+1 RATING.
@ROI#22
Please, explain those economic jargons using the layman’s language to especially to @ Octopus Paul Bwalya#21. He does not understand a single damn word and he does not comperehend as to what the govt. does to attract Direct Foreign investments. Please can you also explain to him the importance of strategic industrialia policy in fact that might help him and others to know how the gotv. can manipulate the TNCs or the multinationals in the transfer of technological advancements to Zambia as a country. Also explain the issue of ownership of shares in TNCs and the possible exclusion of TNCs once the country reaches an advanced competitive edge so as to allow local firms to learn and grow economically.
Why can’t you explain yourself?
….as if economic growth means wellbeing to people. We are tired of growing our economy but the majority of our peopole still living in poverty. The PF should not be excited about this they should just focus on their pro-poor agenda and deliver more equitable projects that benefit the majority poor…!
OK, LT ,MODERATOR, MEANT,””PLEASE NOTE THAT JESUS SAID “”THE POOR WILL ALWAYS BE WITH BE WITH YOU””.
Does this mean that Zambians are now starting to work hard? if this continues i see Zambia developing in less than 50years!
B1 is just too far from AAA, period. This translates into higher interest rates no matter how you look at it.
hello,my friend,how are you