THE Ministry of Finance has said that a rating of Zambia by Moody’s Investors Service, an international credit rating agency, should be ignored because the grading is unsolicited and against best practice.
The Ministry said that Standard & Poors, another rating agency, on Friday reaffirmed Zambia’s rating at B/B long and short term foreign and local currency credit ratings with a stable outlook, reflecting their expectation that Zambia’s fiscal deficit will not weaken significantly.
Ministry of Finance public relations officer Chileshe Kandeta said in a statement in Lusaka yesterday that Government has rating relationships with only two agencies, Fitch and Standard & Poors.
“The two are the only ones with whom we engage on policy matters, and data provision and reconciliation. Therefore, the assessment made by Moody’s that Zambia’s credit rating had deteriorated should be ignored because its correctness was not discussed with any authorised representative of the Zambian government,” Mr Kandeta said.
He said Fitch and Standard & Poors, are sufficiently competent to provide the required independent credit rating services.
Last week Moody’s Investors Service downgraded its credit rating for Zambia citing lower growth and an extended period of weak commodity prices.
Zambia’s rating was cut one level to B2, five steps below investment grade. The outlook on the rating was changed to stable from negative.
Zambia is grappling with its worst- ever power shortage and metal prices that have fallen to six- year lows, prompting companies including Glencore Plc to halt operations. The kwacha has fallen 41 percent against the dollar this year, the worst performance among the world’s currencies.
“The key driver for the downgrade is our expectation that the trend of persistent fiscal deficits and deterioration in debt metrics witnessed over the past few years is likely to continue,” Moody’s analyst Matt Robinson wrote in an e-mailed report. “An extended period of weak commodity prices, constrained copper production, and domestic electricity shortages” are hurting business activity, he wrote.
Yields on Zambia’s $1.25 billion Eurobonds maturing in 2027 have climbed to 11.4 percent from 9.4 percent when they were sold in July.
Moody’s held its rating of Zambia’s foreign debt at B1 in May while changing the outlook to negative from stable. Glencore’s decision to suspend output in the country threatened growth the government forecast would reach 5 percent this year, the company said in a report this month.
Standard & Poor’s on Friday affirmed its B rating on Zambia, also five steps below investment grade, with a stable outlook.