Friday, June 21, 2024

Standard & Poor’s maintains Zambia’s B+ rating, raises concern over policy uncertainties and deteriorating political landscape

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Standard & Poor’s Ratings Services has affirmed its B+/B long- and short-term foreign and local currency sovereign credit ratings on Zambia.

The outlook is stable.

The agency said its ratings on Zambia is constrained by its view of its policy uncertainties, fairly low economic development and vulnerability to copper price shifts, as copper accounts for almost 70% of goods exports.

It said the rating is supported by promising investment prospects in the mining sector, positive economic growth trends, moderate general government debt, and a robust external balance sheet, on which a large proportion of the external liabilities is equity.

The agency said it believes that some policy measures, largely non-anticipated, have increased uncertainties regarding the future economic policy framework.

It said these measures include the mandatory use of the kwacha in domestic transactions and for listing the prices of goods and services, the introduction of an interest rate cap on lending by commercial banks, increased capital requirements for banks and most importantly a recent amendment of the Bank Of Zambia Act that it think may open the way for potential foreign exchange controls.

The agency also stated that the political landscape has broadly deteriorated with what it views as the government’s attempt to clamp down on the opposition, including attempts to block public rallies and repeated arrests of the main opposition parties’ leaders.

It however says most policy measures have so far not dampened growth prospects, and are unlikely to become more radical given Zambia’s reliance on foreign investors for growth.

It forecast GDP growth per capita to remain above 4% in 2013-2016, supported by increased copper and agricultural output, strong foreign investment in the mining sector, and dynamic public sector investment in infrastructure, health, and education.

Standard and Poor’s expects inflation to remain in single digits, where it has been since 2010, on increased food production and contained exchange-rate volatility.

It said over 2013-2016, the rise in tax revenues from the mining sector, resulting from higher production and tax reforms, will likely mitigate the expected decrease in donor grants as well as a rise in public-sector wages.

“It should also support a slight increase in capital expenditure but we do not believe the government will implement all budgeted capital expenditure, which is much higher than previous years’. The budget deficit should remain moderate, around 3% of GDP, though debt may increase by more if the kwacha depreciates.”

“General government debt, including domestic and external arrears to suppliers, should remain under 30% of GDP in 2013-2016, on strong nominal GDP growth of 12%-14%.”

It said, “In our view, the current account will likely remain broadly balanced in 2013-2016, with increased copper output mitigating a potential decrease in copper prices. Furthermore, we expect that strong foreign direct investment inflows, averaging 6% of GDP per year, may, depending on central bank policy, contribute to foreign exchange reserve accumulation during 2013-2016.”

It added, “We estimate that at year-end 2012, the debt portion of external liabilities exceeded liquid external assets by only 6% of current account receipts. However, the external position remains highly vulnerable to a protracted fall in copper prices. Furthermore, we note significant inconsistencies between stocks and flows in Zambia’s reported external data.”

It said the stable outlook reflects our expectation that Zambia’s economic policies will not shift radically or lead to weakening of the current account or higher-than-expected fiscal expenditure, despite heightened uncertainties regarding the new administration’s policies.

The agency warned that it could lower the ratings if the administration’s policies weaken the country’s external, fiscal, or monetary fundamentals, or impair copper
production.

“A downgrade could also follow a significant deterioration of
Zambia’s external liquidity, for instance, as a result of an extended depression of copper prices.”

27 COMMENTS

  1. Ati concern over “uncertainties & detereorating political landscape”. We warned you not to elect these pfools an you didn’t listen.Now you see why mismanaged zambia is my very own diasphorror.

    • Ooh please give me a break, talk is cheap. You want to appear intellengent by hijacking the situ? Waht ahve to offer better than PF?

    • Ooh please give me a break, talk is cheap. You want to appear intellengent by hijacking the situ? Waht have to offer better than PF?

    • Ooh please give me a break, talk is cheap. You want to appear intellengent by hijacking the situ? What can u offer better than PF?

    • @EnkA, it the language of foul mouth, writing insults which has contributed to the scenario we are in. You want to rule before your time. Wise opposition can help build the image of country. At the end of the day what are you telling outsider with insults? Just argue the way western world debates. They don’t trade insults. They urgue their points even very strongly but they dont insult each other. What will happen when you will ever be in power and you are insulted? Or have you lost hope of ever ruling and thus resort to insults?

  2. Which deteriorating political landscape? What Amsterdam has fed them? The lifting of the of RB’s immunity? The democratically-conducted by-elections? This body is comprised of jokers. They should go to Afghanistan, to Pakistan to Syria even to Egypt and Libya, Mali,Nigeria, Greece, Italy. Definitely not Zambia!

  3. Except the increased food production does not exist. Hunger will start biting in June. The match to a one party state is unrelenting. Looting of public resources goes on unabated. Public resource transfers will continue through schemes as Falls Way rentals. What we have in place is not a government but a criminal enterprise!

  4. Which deteriorating political landscape? What Amsterdam has fed them? The lifting of the of RB’s immunity? The democratically-conducted by-elections? This body is comprised of jokers, and do not deserve any attention. They should go to Afghanistan, to Pakistan to Syria even to Egypt and Libya, Mali,Nigeria, Greece, Italy. Definitely not Zambia!

  5. @KALANGA, DESE RE DEMONS ASSIGNED 2 PAINT UR COUNTRY BLACK. VERY UNOBJECTIVE. WE JUST CONDUCTED FREE AND FAIR BY ELECTIONS,INFACT VIOLENT FREE. EVEN WAT DEY HAVE SAID ON DE ECONOMICAL FRONT IS SUBJECTIVE. JESUS WILL NOT ALLOW DEM SUCCED. INFIDELS!

    • @ osmore. This is the problem that we have as Zambians too much politics and useless beliefs.The fact is standard and poors remains the most reliable source for most investors willing to lend money to any company and country.The rating by these guys directly affects the cost of raising capital and i can assure you that if our rating was C when we where doing the eurobond thing the cost would have been more.The rating by these guys affects the volume and interest in the country be GENIUNE Investors.The questions that we must be asking ourselves are (1) is it worth it to produce more copper for sale now when prices are down or maintain the current production and only produce more during pick periods.2. What if we have bad rains and we dont bamper harvest how will that afect our rating

  6. @2201 Kalanga Street. Ati go to Libya Afhganistan! Why go there? This report is about Zambia not Libya. These people have various methods of picking information and they test and verify it before application. You are so paranoid that whatever comes out from International observers of trends and activities is from Amsterdam. Through your jaundiced eyes what you see is, “they are bitter because their cohorts lost an election!”

  7. @2201 Kalanga Street. Ati go to Libya Afhganistan! Why go there? This report is about Zambia not Libya. These people have various methods of picking information and they test and verify it before application. You are so paranoid that whatever comes out from International observers of trends and activities is from Lawyer Amsterdam. Through your jaundiced eyes what you see is, “they are bitter because their cohorts lost an election!” Grow up.

  8. Malabbish yeka yeka……… So this actually excites our brothers and sisters on ZWD. This does not mean sh** Britain has also been Downgraded has anybody said anything? No 1 Zero…. So now that Armsterdam, HH and Mumba gave them some useless data ati “uncertainties & detereorating political landscape”

  9. HH,NEVERS CHI AMSTERDAM are useless and corrupt people. HH and Nevers are power hungry but they will never entre plot 1 even after Mr Sata finishes his 2nd term. Amsterdam is an opportunist solicitor not a lawyer , he has no clients in the U.K but he claims to be an international lawyer ,my foot this chap is just living off R.B with the stolen millions. Ati international lawyer

  10. The report is right about detereorating political landscape. Opposition political parties are inhibited in their endeavors to take their message to the people via the oppressive Public Order Act and a partisan Brutal Police Force. This was not so in the previous regimes. Sata, Guy Scott were allowed to take their message to any part of Zambia without hinderance by Mwanawasa or RB.

    • Mike, do you remember what happened during the heralded Mwanawasa era when the then Solicitor General (Nkonde) told the police that they had no grounds to ban a rally by Sata? Banning of rallies by opposition political parties has always existed in Zambia.

  11. Those opposing assessment made by Standard & Poor,s professional opinion reflect how poor PF government inability to fit in modern governancy. They prefer opinion from headmen from Sikongo, Chilubi island, paraded Tonga chiefs, Chitungulu, Mtalanga, Chatulinga and Mukamambo 2 that Sata is giving farmers a fair deal. Oh no, you cant bake and taste your self. Its OTHERS to say how PF govt is seen by other people not just in Mwense but world over. That ‘concern over uncertainties & detereolating political landscape is a worry for the future of the country’. This assessment is a true relection of most Zambians who care for our country.

  12. Is B+/B the same as B+ ? And ukwa should stop arresting opposition leaders on flimsy or trumped up charges if we have to retain our rating. Please Ukwa, we know you dont care but have a hearst for the future of the country.

  13. Is B+/B the same as B+ ? And ukwa should stop arresting opposition leaders on flimsy or trumped up charges if we have to retain our rating. Please Ukwa, we know you dont care but have a heart for the future of the country.

  14. I would be interested to know what significant foreign investment, or even pledges, we have received since the PF took over Govt? That is what matters if our economy is going to grow.

  15. Don’t comment if you don’t understand what’s being said by this report.The UK has suffered a big downturn that has kept growth in the doldrums. The outlook is still bleak out here. The banks are not lending out any money. Small business are being suffocated for lack of capital, the housing market has stagnated and mass lay-offs are the norm. We live in the era of austerity measures – do away with unnecessary public spending. KK used to call it ‘tighten your belts before your trousers start falling off’ the Zambian down turn started mid 80s until change of government and new policies moved us up a few notches in growth in early noughties (2000s) but then the dream was lost – poor finishing. The downturn or better known as the credit crunch in western world has lasted for almost…

  16. Don’t comment if you don’t understand what’s being said by this report.The UK has suffered a big downturn that has kept growth in the doldrums. The outlook is still bleak out here. The banks are not lending out any money. Small business are being suffocated for lack of capital, the housing market has stagnated and mass lay-offs are the norm. We live in the era of austerity measures – do away with unnecessary public spending. KK used to call it ‘tighten your belts before your trousers start falling off’ the Zambian down turn started mid 80s until change of government and new policies moved us up a few notches in growth in early noughties (2000s) but then the dream was lost – poor finishing. The downturn or better known as the credit crunch in western world has lasted for almost…

  17. Don’t comment if you don’t understand what’s being said by this report.The UK has suffered a big downturn that has kept growth in the doldrums. The outlook is still bleak out here. The banks are not lending out any money. Small business are being suffocated for lack of capital, the housing market has stagnated and mass lay-offs are the norm. We live in the era of austerity measures – do away with unnecessary public spending. KK used to call it ‘tighten your belts before your trousers start falling off’ the Zambian down turn started mid 80s until change of government and new policies moved us up a few notches in growth in early noughties (2000s) but then the dream was lost – poor finishing. The downturn or better known as the credit crunch in western world has lasted for almost…

  18. We need a firm economic policy by using the performance of 2010 and it’s rate of growth as benchmark. Economic performance 2009= 6.4, 2010=7.6, 2011=6.6, 2012=6.9. Economic forecast for 2013 7.3 yet still nowhere near 2010. At large the performance of 2010 could be attributed to mainly construction, agriculture, transport and communications, mining. Hence, good performance for 2013 is underpinned by sustained expansion in these sectors.

    Currently, agricultural sector is dwindling, exports of goods 2010=43.3, 2013=41.5. Figures also indicate tax revenue for 2010=16 & 2013=12.6. Increased sustained borrowing which increases Zambia’s external debt needs to be paralleled by specializing locals skill sets, diversifying industries which requires participation from both diaspora & locals.

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