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Tuesday, July 7, 2020

Fitch Ratings Agency affirms Zambia at ‘B’ with Negative Outlook

Headlines Fitch Ratings Agency affirms Zambia at 'B' with Negative Outlook

Lusaka city

Fitch Ratings Agency has affirmed Zambia’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘B’ with Negative Outlook.

The issue ratings on Zambia’s long-term senior unsecured foreign- and local-currency bonds and short-term senior unsecured local-currency securities are also affirmed at ‘B’.

This is according to the Agency’s website, today.

Efforts to get Finance minister Felix Mutati to comment on the matter failed by press time as he was unreachable.

However, Agency says the Zambia Ceiling is affirmed at ‘B+’ and the Short-Term Foreign and Local Currency IDRs at ‘B’.


Zambia’s ‘B’ IDRs reflect a combination of the country’s persistent fiscal deficits, which have led to a doubling of the general government debt ratio over the past five years, and structural constraints that keep economic growth below potential.

These weaknesses are balanced against an improving fiscal and external outlook, enhanced monetary policy credibility and the potential implementation of a fiscal and economic adjustment agenda, which is likely to be supported by the adoption of an IMF programme.

Under-performance in revenues, mostly related to the mining sector, and the weakness of expenditure controls have led Zambia to consistently overshoot its fiscal deficit targets.

On a cash basis, the 2016 fiscal deficit is estimated at 5.5% of GDP, but the accumulation of new arrears, mostly related to road spending, pension contributions and fuel and power imports, pushed the deficit closer to 9% on a commitment basis.

Fitch forecasts the 2017 general government balance to narrow to 6.1% of GDP on a commitment basis. The tightening is mainly driven by no accumulation of new arrears (vs. an estimated 3.8% of GDP of new arrears in 2016).

Fitch expects the authorities will also pay down some of the accumulated arrears (an estimated ZMW2.5 billion or 0.9% of GDP) which will widen the cash deficit to 7% of GDP.

Going forward, the government’s fiscal consolidation will be supported by fuel price adjustments made in October 2016, planned cuts in electricity subsidies, tighter expenditure control and an increase in revenues from the mining sector, which will see an expected increase of up to 10% in copper production.

Kwacha appreciation has helped to stabilise the debt/GDP ratio, but high debt servicing costs present a downside risk to fiscal consolidation.

General government debt will increase to approximately 53% of GDP in 2017, from 48% at end-2016, which is below the ‘B’ median of 60%. However, Zambia’s debt burden is more significant in light of the country’s generally low levels of domestic revenue mobilisation. Debt as a percentage of revenue stands at 258% of GDP and interest payments at 19% of revenue, both well above the ‘B’ medians of 242% and 11% respectively. Zambia has been in discussion with the IMF over a possible support programme since early 2016 and, despite the protracted nature of the discussions, Fitch expects that the authorities will reach agreement on a programme in 2017.

A programme would help to provide a policy anchor and would also unlock additional sources of external financing from multilateral and bilateral lenders at concessionary rates. The government has committed to an economic recovery programme that includes increasing domestic resource mobilisation, rationalising expenditures, and arresting the accumulation of new arrears.

Fitch expects that all of these areas would be enshrined into an IMF programme. The Fund will return to Zambia in March to conduct Article IV consultations and to continue programme discussions. Fitch forecasts GDP growth of 4% in 2017, an increase from 3.1% in 2016 but well below the 7% growth that Zambia averaged in the 10 years prior to 2016.

Growth will be supported by increases in copper production at the Kalumbila, Kansanshi and Lubambe mines which, along with an increase in copper prices, will keep growth in the mining sector above 4%.

Additionally, increasing rainfall will boost agricultural output and also aid the nation’s strained power generation capacity. However, the country will continue to operate at a power deficit of roughly 200MW through 2017.

A lack of transport infrastructure and an under-developed agricultural sector will remain a constraint on Zambia’s growth potential. An improving trade balance will help to keep the Kwacha stable; Fitch expects a slight depreciation to approximately ZMW10.5 per USD. In addition, the monetary policy tightening undertaken by the Bank of Zambia (BOZ) in 2015 and early 2016 will help keep inflation in single-digits. Fuel and electricity price adjustments will lead to some inflationary pressure.

BOZ has already begun to undertake some monetary loosening through adjusting reserve ratios and lifting previous restrictions on overnight lending. Fitch expects a lowering of the monetary policy rate some time in 1H17.

However, more substantial monetary loosening is unlikely until the government has established the credibility of its fiscal policy adjustments. The severe tightening of domestic liquidity conditions that started in late 2015 and the weakening of the economy led to a rise in non-performing loans to 9.7% last year from 6% in 2014.

Liquidity has improved as the currency has stabilised and as BOZ unwinds some of its interbank lending restrictions. The Zambian banking sector is generally well-capitalised and well-supervised by the central bank. Fitch forecasts the current account deficit to narrow to 2.1% of GDP in 2017, after having widened to 4.8% in 2016.

Zambia averaged a current account surplus of 3.8% of GDP in the years 2010-14, but low export receipts and increasing external debt servicing payments brought the current account into deficit in 2015.

The stable kwacha will aid foreign exchange reserves accumulation, along with expected inflows of external financing, and should bring the international reserves position to USD2.5 billion, approximately 3.2 months of current external payments, by end-2017.

The high growth rates generated by the booming copper sector resulted in an improvement in social indicators, but per capita income (at 60% of the B median) and measures of human development remain weak compared with ‘B’ category peers.

Health and education outcomes are especially weak, with an average life expectancy of 60 years. The lack of skills adversely affects the employability of the workforce, with only 10% employed in the formal sector.


Fitch’s proprietary SRM assigns Zambia a score equivalent to a rating of ‘B-‘ on the Long-Term Foreign Currency IDR scale. Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final Long-Term Foreign Currency IDR by applying its QO, relative to rated peers, as follows: – Macro: +1 notch, to reflect BOZ’s implementation of monetary policy, which supports macroeconomic stability and the expected implementation of the government’s fiscal and structural reform agenda, which is expected to be supported by an IMF programme.

Fitch’s SRM is the agency’s proprietary multiple regression rating model that employs 18 variables based on three year-centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign Currency IDR.

Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.


The main factors that could, individually, or collectively, lead to the ratings being downgraded include: – A sustained inability to access external sources of financing, as might occur with the failure to successfully negotiate an IMF programme, and which could lead to liquidity and funding shortfalls;

  • A failure to reverse fiscal deterioration and stabilise the government debt ratio;
  • Further deterioration in external balances, for example through a sharp and sustained fall in copper prices, relative to Fitch’s forecast.

The main factors that could, individually, or collectively, lead to the Outlook being revised to Stable include:

  • The successful implementation of an economic reform programme that leads to sustained higher growth;
  • Effective fiscal consolidation that leads to a sustained narrowing of the fiscal deficit and stabilisation of the general government debt ratio;
  • A rise in international reserve coverage, thereby reducing Zambia’s vulnerability to external shocks.


Fitch expects that the authorities will come to agreement with the IMF on a lending support programme that contributes additional external financing. Fitch assumes a gradual increase in copper prices over the medium term.

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  1. You should have shown us some pictures of Under 20 players, than this story of rating
    I don’t make anything out of those numbers. You can rate Zambia any how, nothing will woke up the sleepy ministers.

    • Sorry I do not know the meaning of all these terms in this article though one thing I have noticed is ubunga and other food stuffs have become extremely expensive.
      Can any economics person please explain to me in layman terms the meaning of this Negative B (-B) rating.

      cheers. Thanks

    • This is as worthy as zambia being ranked 60 instead of 63 for people that follow football. That’s right nothing.

      Considering the debts and lack of funds accountability and all the maize scandal euro band lessons. We should really be ranked D.

      Fitch are a joke



    • These indicators are meant to be highways of progress, aiding countries to take stock…do black people possess no mental capacity to improve their surroundings? Is it possible for a black government to be genuine and care for its people? YES!

    • I can’t read all this long staff, I have more important things to do like preparing for my Masters in Economics and Finance Exams, who cares what Fitch ratings mean ??? Shaaaah!!!

    • Folks what all this means is that Mutati and Zambia under PF can only issue Junk Eurobonds where by the bond yield is very high. High Bond yield translate into high interest repayment rate for senior debt(external debt) which has to be repaid first before any other debt Zambia owes.

      For example if Zambia borrows $1 billion, it will have to pay above 40% interest meaning that Mutati and his PF only receive $600million, while the $400billion is retained for interest payment upon which more than 15% monthly payment is levied for say 1o years. So part of monthly debt servicing payment Zambia would be paying $60 million for 10 years. Then on the 10th year zambia pays back $1billion + $60million. Total repayment after ten years over $2billion because monthly rate for Junk bonds is…

    • Total repayment after ten years over $2billion because monthly rate for Junk bonds is usaually floating mainly upwards.

      Just think of it, why should PF pay back over $2billion for receiving only $600milion in cash? Reason PF poses a very high political risk with all this floating idea of leaving ICC.

      For the current Zambia senior debt stock Zambia will struggle to pay monthly interest. Thats why Mutati has come out lying and fake surplus which is typical PF saying the exact opposite of the truth.

      By end of 2019 Zambia will have devalue Kwacha to levels of Zimbabwe where bread will now be costing in the range of millions or billions of Kwacha due default loan payments.

      Dont say I did not warn you folks about where Zambia is headed under Chakolwa Lungu.

      Only UPND HH and GBM…

  2. Sometimes I look back and wonder what zambians really want. In 2011 we had a healthy economic life was good there was cash in the economy. We voted RB out, mumuring about his children. In came a sick man who emptied the reserves enriched his kinsmen and children. We revoted PF

    • @Afro HH: Zambians love poverty. RB & Sons’ misdemeanours are nothing compared to the thieving rampage that the Bembas and PF carried out over the last 6 years. The economy has been trashed and they claim it is “globo”. I expect that small brain Stoopid Kandeta at Ministry of Finance to come out again and say that Fitch were not commissioned to rate Zambia. This is what you get from handing over the running of a country to a bunch of corrupt screwballs.

  3. Distortions in the energy sector and poor copper exports played a role in this negative outcome. Other factors include consecutive election budgets, external borrowings and sustained above average consumption. The way forward is economic diversification (tourism, agriculture, manufacturing, mining) coupled with viable public transparent accounting system. No mercy!

    • Dr. Makasa Kasonde

      Thats a dream far fetched under Lungu. All the sectors you are mentioning, were thriving before this mad regime came into power.

      The only way out of this mess is to get rid of PF by force and get them to pay back all the money they stole period.

  4. The Rating means poor macro-economic performance for Zambia. The prospects for 2017 onwards look bleak. Given that the illegitimate Lungu govt is still refusing to hear the Petition and reluctant to implement reforms and carry good governance practices the outlook looks worse. With no respect for Rule of Law, Constitutionalism, Property and Human Rights the prospects for Zambia look gloomy. The Petition Disputes are likely to spill over to International Courts and that will destroy the image and reputation of Zambia.

    • That will not happen – when are people going to stop hallucinations and prepare for the next elections? There are no “International Courts” that will waste their time on a dead issue like this.

    • Ba Chando this is economics they are talking about not election petitions. If you want to bring in politics in this issue please present us with your party’s economic policies that will address within 1 to 3 years all the issues raised in this report. Don’t just say you will fix it. How? PF is now leading, and what we should be discussing here is cost cutting. The president needs to cut costs on travel, for now we should combine certain ministries because we don’t have the luxury to have a cabinet size like we do currently. Embassies should represent us abroad except where it is absolutely impossible to do so. Zambian businesses should be patriotic and not behave like that man who was sweeping forex from the market and putting it under is bed. Only his death revealed how unpatriotic…

  5. We were we be the B negative assessment? Hav we regressed, remained static or moved up a notch? How do we compare with other African countries (The whole spectrum from South Sudan to South Africa? These ratings are useless without the element of relativity.

    • Zambia’s growth projection was 7% for 2017 less than 5 years ago. In terms of Southern Africa we are 1 of 7 countries on a negative outlook. South Africa may only see 1% growth thie year, but they have liquidity. E.Africa is growing at a rate of 5-8% as central banks have shown up theit reserves and currencies have not depreciated above 5%. The Kwacha did at 17% in 2016. Nigeria is currently in a recession, due to theit heavy dependance on oil. An economic recovery plan with Mckinsey has been done to source external financing as the IMF or World Bank would not lend. Only 19 countries are set to grow beyond 5% in SSA.

    • @Folosho: your mentality is typical of a “bad neighbourhood” influence. In short somebody in Chibolya only cares if he is doing better or worse than their neighbour and not against those in Kabulonga. No wonder you want to include South Sudan in your comparison, and not Singapore or Chile. You want to prove that our grovelling in poverty is better than our similarly mentally challenged neighbours and not aiming to be in a better place like Rwanda or Botswana do.

  6. Generally the outlook is still positive, 10 years before 2016 the economy according to them was doing better however they still project a growth of 4 percent this year which is good.
    Mention of Kwacha stabilty, improved copper prices are helping to maintain a rating that is still better than all of Zambia’s neighbours except for Namibia and Botswana is still a very good achievement!However Mutati is not performing as expected- more can be done in the area of cutting down government expenditure without making the average citizen suffer.

    • Who was the blogger that said the kwacha would be down to 5 against the dollar by march….i think he predicted a mealie meal price around 45 per bag

    • Kikiki…Ba Vision2020, how can the outlook still be positive when the report clearly states negative outlook. Anyway I like your optimism. Am also optimistic that we can make our country and its economy better. I love my country despite all its problems. But we need to do something about mediocre leadership.

    • Typical PF thinking, trying to make the most of a bad apple. Remember that it is your choice to have a mediocre leadership.

  7. i agree Mushota. Zambia’s economy is like the pic above which is looking nice but once you walk around Cairo road and the surrounding roads like Lumumba and Kulima Tower, you get the truth about Lusaka as a city.

  8. I nez have been telling you that pf has done nothing but make things worse. Those silly cadres saying this rating is irrelevant are just hopeless failures in denial because fitch rating is an internationally recognised credit rating. So please pf wakeup and realise that your dictatorship has failed. Pf must go

  9. My guess is that all the analysis given in this article, with the Panga family’s mentality and aptitude, this is too much to fathom. The other day Mutati was ranting and being sarcastic saying that the IMF program should fit into their recovery program Zambia+. Clearly from what we have read here and what we have always said, there is no escape to the IMF program with their dictates, otherwise we are doomed as things stand. This infor given here is succinct and not plausible as some would like to believe but is a matter of calling a spade a spade. We need to heed to the advise given and curb on excessive and unplanned expenditure, endeavor to reduce interest rates and bring back the confidence in our markets. The micro economic environment needs to improve and improve pretty fast for us…

  10. The Finance Minister is MIA all of a sudden. As long as they keep dragging their feet on structural reform, fiscal discipline, diversification, that rating will get worse. The projected 4% growth is unlikely. The idea that the IMF will bend to Zambia is unlikely.

  11. wwwDOTzambiawatchdogDOTcom/now-mutati-says-there-will-be-suffering-in-next-3-years/

    Even MUTATI himself has lost hope in the CHIPANTE-PANTE illegal Regime recovering the economy.

    Guys, next time don’t vote/rig becoz of a SONG, becoz of TRIBE, bcoz of promise of a contract or a Govt JOB.

    Majority of us don’t have access to these “contacts” and have to experience hardships becoz of your greed. There’s no shop where they sell mealie-meal at K35 to PF00Ls. We are now forced to suffer bcoz of your stup1dity .


    When is the price of mealie-meal coming down to below K50?
    Where r the 500,000 Jobs?
    When is Load-shedding ending?
    When is K5/litre fuel starting?
    When is Mulungushi Textiles re-opening?
    When is Kitwe Black Mountain going to be handed over to the Jerabo…

    • CONT’D
      When is Kitwe Black Mountain going to be handed over to the Jerabo Youths?
      How are the Street-vendors going to feed their families?
      When are taxes, road-tax, rental withholding tax, going to be reasonable?
      When are corrupt ministers, judges going to be fired?

      ALL FAT LIES BY your Humble illegal president!!!

      When will political prisoners be released?

  12. Who was the blogger that said the kwacha would be down to 5 against the dollar by march….i think he predicted a mealie meal price around 45 per bag. Am serious I remember reading but cannot remember the blogger. Can anyone recall who it was tks

  13. That ‘s a problem with Zambian people you go to school and read the notes and you come and start reading the same notes in your head without explaining it into a lay man’s language, Fitch rating and bla bla bla how can some one from dundumwezi know these figures? stop taking space and waste people’s time if you can not explain what you learned in simpler terms for every body to understand, your education is not good to any one. not every one has studied what you have studied. Now you even confused people like NEZ, he only contributed one sentence on the matter, Jay Jay is even no where to be seen. Please do your home work next time you post important issues. thank you.

    • That is how PF fool people. If things where good and the article predicted a bright future they would have started dancing and sontaporing….

      By the science from Amos chanda and the rest of the theives and the f00ls on here I can tell things are not good….

    • That is how PF f00l people. If things where good and the article predicted a bright future they would have started dancing and sontaporing….

      By the science from Amos chanda and the rest of the theives and the f00ls on here I can tell things are not good….

    • @CF: if I was going to summarise what the above means, it would be that Zambia is fvcked. You need to take the IMF medicine to remotely get to your growth targets. Copper prices are not shooting up soon enough. There’s no magic bullet after you stole $9.3 bn in 5 years. The party is over. That’s why the outlook is NEGATIVE. Do you get it?

  14. Tge type of politics in Zambia has funked up the economy and everything. Neither PF nor UPND has real solutions, these are personal parties of Lungu and Hakainde, respectively . What we need is a new team based on clear national cause and agenda, like the 1991 MMD, proper team. It’s a pity Chiluba personalised MMD. Now all current political parties are personal projects for an individual to become President. We need a brand new movement for 2021 to take over government.

  15. “However, Agency says the Zambia Ceiling is affirmed at ‘B+’ and the Short-Term Foreign and Local Currency IDRs at ‘B’.”

    This is actually really good. Zambian economists, it is now your turn to shine. Zambia is robust, but Mwanakatwe, Mutiti and Dora should be removed as ministers.

    • Funda Fundi that means Zambia is Highly speculative. You can invest and get your investments back with profits, some risk included. It has a stable safety record, and non violent uprisings have occurred in a democratic and healthy bracket. If the Business community and government plus individuals move progressively, Zambia can grow economically.

  16. Is our finance minister in the Country. Has there been a rezponse from State House olr are bloggers the only ones responding.

  17. Zambia’s economy is like the photo above – lots of gaps ,unintegrated ,nothing towering ,unhealthy pastures and old dreary uninspiring buildings.

  18. Umwina chishinga, Let me keep it real with you “your country is broke period”. Don’t act like everything is okay when it is not. These people are professionals and know what they are talking about. Investors, lenders and donors view their reports before they give you any money. The sensible thing you and your celebrity party can do is learns from your mistakes and correct everything. Success won’t come just because some say you sent by God. you have to put in work and not just structures.

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