Tuesday, June 18, 2024

Moody’s downgrades Zambia credit rating to negative, says risk of debt default on the increase


Credit rating agency Moody’s has downgraded Zambia’s credit rating with a negative outlook.

The rating has moved from Caa1 to Caa2 and the agency says this is due to external and liquidity pressures impairing government’s ability to service debt over medium-term, raise probability of default over the near term”.

The downgrade follows three downgrades in 2018.

Below is the full statement from Moody’s

Moody’s Investors Service (“Moody’s”) has today downgraded the Government of Zambia’s long-term issuer ratings to Caa2 from Caa1 and changed the outlook to negative from stable.

The downgrade reflects increasing external and liquidity pressures, which, by impairing the government’s ability to service its debt over the medium term, raise the probability of default over the near term, including a distressed debt exchange, beyond what is captured in a Caa1 rating.

The rising probability of default also reflects increasingly stark credit challenges stemming from rising debt levels, which further reduce the likelihood that the external and liquidity stress will be resolved rapidly.

The Caa2 rating balances those pressures against the possibility that Zambia could refinance the forthcoming maturities and continue to service its debt while preventing a depletion of foreign exchange reserves.

The negative outlook reflects the risk of material losses to investors in the event of a default by Zambia, beyond what would be consistent with a Caa2 rating.

Concurrently, Moody’s has lowered Zambia’s long-term foreign-currency bond ceiling to B3 from B2, its long-term foreign-currency deposit ceiling to Caa3 from Caa2, and its long-term local-currency bond and deposit ceilings to B2 from B1.



External vulnerability and liquidity pressures have increased since Moody’s last rating action in July 2018, as reflected in dwindling foreign exchange reserves and a sharply increasing cost of debt. With only very limited prospects that these pressures could ease, the probability of default has risen beyond what is captured in a Caa1 rating.

Despite mineral royalty receipts being now remitted in US dollar, the country’s foreign exchange reserves have continued to decline gradually in recent months, drained by sizeable external government debt service and a current account deficit. As of the end of April, foreign exchange reserves had fallen to about US$1.1 billion (gross international reserves including gold and IMF SDR holdings stood at US$1.3 billion), or 1.3 months of imports, well below the three-month of imports threshold commonly considered a minimum level of reserve adequacy. Current reserve holdings have reached a record-low level in almost a decade and are very low compared to the external debt payments due in the remainder of 2019 and in 2020, let alone imports payments.

Moreover, while at the time of the last rating action, Moody’s expected foreign exchange reserves to stabilize at around $1.7 billion, it now looks likely that, in the absence of an IMF financial support program, or of a debt reprofiling with some creditors including China, reserves will continue to decline given Zambia’s external debt service and imports payments.

The narrow reserves buffer leaves Zambia’s external position highly vulnerable to even small shocks, in particular to a fall in prices or production of copper or adverse business environment developments, that would significantly impair the government’s ability to service its external debt obligations. Moody’s projects its External Vulnerability Index (EVI) – the ratio of external debt payments (short-term and maturing long-term debt) due over the coming year and non-resident deposits over one year to foreign exchange reserves – to exceed 200% in 2019 and to rise further in the coming years as external debt payments coming due increase with the upcoming Eurobond maturities and reserves continue to decline.

External vulnerability is associated with heightened government liquidity risks. With falling reserves, very low fiscal policy credibility, and no tangible progress on talks with the IMF, spreads over U.S. Treasuries have widened to very high levels indicating impaired market access. Yields on domestic government securities have also continued to increase over the past year to very high levels. In addition, non-resident investor interest in Zambia’s domestic securities has declined to about 15% as of March 2019 from 17% in June 2018 amid lower confidence. Overall, Zambia’s access to market financing at manageable costs has become significantly impaired. In turn, the increasing cost of debt contributes to elevated borrowing requirements (likely to exceed 15% of GDP in the next few years), further constrains the government’s financing options and raises liquidity risk.

Refinancing risks will intensify in the early part of the next decade as large Eurobond maturities fall due with early market-based refinancing prevented by unaffordable terms and no clear strategy to address the repayments. The government has for some time intended to reprofile bilateral loans owed to Chinese entities (that Moody’s estimates to account for close to 30% of the total public external debt), but no progress that would ease liquidity pressures materially has been achieved so far. The government also created a sinking fund to save in advance for Eurobond maturity payments but little has been accumulated up to now. With Zambia running sizeable deficits, Moody’s does not expect the fund to accumulate sufficient proceeds to reduce the Eurobond rollover risk meaningfully.

The Caa2 rating also captures the possibility that Zambia could refinance forthcoming maturities and continue to service its debt while preventing a depletion of its foreign exchange reserves.


The rising probability of default in Moody’s assessment also reflects increasing credit challenges stemming from rising debt levels, currently exacerbated by weakening growth, which further reduce the likelihood that the external and liquidity stress will be resolved rapidly.

External and liquidity risks have put pressure on the exchange rate, raising Zambia’s foreign-currency debt burden. As a result, Moody’s now projects Zambia’s government debt burden (including arrears) to exceed 76% of GDP in 2019, significantly higher than earlier expected, and to increase further approaching 80% early in the next decade.

The depreciation of the exchange rate in recent months has increased the debt burden. Consistent with very low foreign exchange reserves, depreciation pressures on the exchange rate have recently resumed. In the absence of credible policies to rebuild a foreign exchange reserves buffer, Zambia will remain exposed to bouts of depreciating pressure which would negatively affect the debt dynamics, given the significant proportion of debt denominated in foreign currency (at about 60% of the total).

The fiscal target was missed in 2018 and the fiscal deficit on a cash basis amounted to 7.6% of GDP in 2018 which was higher than the budget target of 6.1% – albeit in line with Moody’s expectations – mainly as a result of higher than planned interest and capital spending. The stock of arrears also increased during the year, at 5.6% of GDP at end-2018. Moody’s projects the fiscal deficit to average 7% of GDP in 2019-20 as spending pressures in particular from interest payments persist given the very high and rising cost of debt, resulting in a slower pace of fiscal consolidation than expected by the government.

The subdued growth outlook exacerbates the heightened fiscal challenges. Real GDP expanded by 3.7% in 2018 and Moody’s projects it to remain below 3% in 2019 as a weather-related shock to agriculture undermines growth further. At these rates, GDP growth barely matches population growth. Furthermore, risks are tilted to the downside. A lack of decisive and credible measures to address fiscal and external challenges could weigh on growth to a greater extent than Moody’s currently assumes, particularly if the accumulation of domestic arrears continues, negatively affecting the banking sector’s asset quality and private sector credit growth. It could also erode investor confidence further and exacerbate already intense pressure on the exchange rate, forcing the central bank to tighten monetary policy significantly.


The negative outlook reflects the risk of material losses to investors in the event of a default by Zambia, beyond what would be consistent with a Caa2 rating.

Heightened and persistent fiscal, liquidity and external risks, and high and rising debt burden point to the possibility of significant losses in the event of a possible debt restructuring, including a distressed exchange.


Given the negative outlook, an upgrade is highly unlikely in the near term. Moody’s would consider changing the outlook to stable in the presence of sustained improvements in Zambia’s external liquidity position with a significant increase in foreign exchange reserves, and, probably at the same time, a lasting easing of liquidity pressures, in particular related to effective fiscal consolidation and a credible strategy to address the Eurobond repayments.


Moody’s would downgrade the rating in the event of a larger or more rapid fall in foreign exchange reserves and/or further increase in liquidity stress that would make a default by the government on its debt payments increasingly likely, and under which Moody’s would expect losses to investors to be larger than consistent with a Caa2 rating. A default could occur from a liability management exercise that would be considered a distressed exchange by Moody’s and therefore a default under its definitions.

Developments in financial market indicators and liquidity and external vulnerability metrics required the publication of this credit action on a date that deviates from the previously scheduled release date in the sovereign release calendar, published on www.moodys.com.


  1. And our leaders still need a vote in 2021? I think sometimes its best to say I have failed , I step aside may someone come forward. Or gather economic experts, “lock them” in a room and tell them they don’t come out without a solution. Damn it its so annoying that our leaders are not talking to us about it. They were warned about this along time ago and now here we are. Someone even warned that we won’t eat roads. Look likely we may have to start chewing them

    • The only problem I have with Zambian Politics is way too many uneducated Cadres….it looks like we are being ruled by Cadres now and am asking myself where did all these moronic Cadres came from……Zambian economy is not getting better and Cadres are busy fighting and raising their stupiiid party symbols….be it UPND or PF……same nonsense

    • 1.2
      *** meant to say where did all these moronic Cadres come from…..and they all speak in Bemba to sound tough…..shame to our Leaders for allowing Cadres to take over our beautiful country

    • Which experts can you really lock in a room and expect them to come up with a credible solution? Zmabian so called experts are no better than politicians and in fact are themselves politicians. As a matter of fact it misguided “experts” like Alexander Chikwanda that have brought this misery.
      He was calling other lunatics when they warned him about the debt trap – but now we can tell that the lunatic is Chikwanda himself; an outdated old and ancient style so called economist who doesn’t even deserve the comfort of jail but must be shot dead for bringing this misery after stealing big time!

    • Ignore Moody their rating means and should mean nothing.

      It’s like weather forecast it’s jot always that they get it right is it ?

      They are enemies of Africa.

      Ignore them – Go to Zambia and see Malls being built, see road construction going on. See cars being bought by people with low income.

      Zambia Economy is vibrant. That’s all that matters




    • @1.4 Munone
      You might be right and wrong at the same time….dont confuse “being a coward” or allowing lawlessness…..two different situations….” uneducated Cadres can only thrive where the rule of law is nonexistent…….i have nothing wrong with uneducated individuals but my concern is the level of stupidity being displayed by Cadres from both PF and UPND……and you can imagine some of them end up as Ministers just like Lusambo,GBM…late Willie Nsanda, Kambwili..Kaizer Zulu etc….i don’t think we can improve as a country having such individuals as Ministers

    • Prophet Lukaku should resurrect Sata so that he sees for himself the mess he created,i tend to feel he took the easy way out by dying he should have been here to see the total mess he created from the prosperous nation that the man he called a cabbage left behind.We should interrogate ourselves,”..who was the real cabbage”?

    • They don’t hold our future … our future is in our own hands. They can go hang for all I care.

      Let’s roll …


    • Look at BR JUNIOR spewing nonsense…really laughable…and he is an investment banker he is writting off a Rating Agency, this just reinforces what I always say about him; zero professionalism just a foooolish silly two-bit cadre (and not of UNIP)

    • Zambia’s rating is now JUNK rating.
      As is the leader so are the subjects.
      Garbage In, Garbage Out (GIGO)

      Solution is simple, throw the legacy of PF in the garbage bin, bring in the Change, the real change.

      If not done, Kwacha will be K1,00 to a dollar very soon. More these clueless thugs masquerading as Ministers, Permanent Secretaries, Members of parliament, Judges, Military brass and in league with the President, stay in power more Zambia will go down.

      Zambia needs non-cooperating movement, no taxes to be paid, no minister to be allowed to drive in and out of his residence, children and relatives of Ministers, President to be named and shamed, Gandhian peaceful way of revolution is the need of the hour.
      Once change comes, all those who stole to go behind bars for good…

    • Moody orgasmates on Zambia and all of a sudden all HH’s supporters go into a climax over it.
      Moody has once been caught lying about the UK’s economy.
      Don’t mind moody Moody, they are in terrible mood.
      Climaxing Zambianically.

    • Too late; they have already stolen are will; forever be comfortable. Just continue dancing to Dununa Reverse till 2021, that is what you wanted when you voted for PF and Lungu.

    • That is too far. Will there be any Zambia worth writing about, living for? We need a change now. Lungu and his cronies shall rot in Jail.

  2. This kind of language PF do not comprehend, its amazing that we have people who we are paying colossal sums to put things right, alas, what we are getting is a raw deal. With all the technocrats in government and cadres in PF, is this the best you can do? 76% debt burden to GDP, 1.1 billion USD reserves and 1.3 months import cover for an economy with an estimated GDP of 30 billion USD? There is something terribly wrong with our governance system, the sooner we accept the better. How come everything is going from bad to worse? These PF dullards have messed up big time and if we let the status quo to continue, the damage will be too ghastly to contemplate. This is indeed dununa reserve reloaded.

    • The best person to ask that question is that Old and Ancient fossil Alexander Chikwanda who was calling others lunatics when they tried to caution him!! The bas.tard in the hibernation mode and actually hiding after stealing so much money.

  3. Another exceptional achievement by PFoools, These morons have truly failed, I don`t think the term leaders is supposed to be used on this lot, they are just too dull…. fyalefuma last mu class. These dander heads have really brought this country to it`s knees with their dull decisions made in bars while drunk… going nowhere slowly the case of mother Zambia

    • The fooooools will say Moody is not credible….just yesterday we were Grade B-ve not we are C -ve…very shameful. I was reading posts on FB from 2012 and there was this article on Fossil Chikwanda calling people lunatics you telling him borrowing was unsustainable and PF cadres as usual in support and calling everyone opposition now we are all in this together because of these stubborn fooools.

  4. Lungu! No press conference, running away from being interviewed by any credible media such as BBC, when addressing parliament on state of the nation he talks of morals, of which he has completely nothing to show, instead of real things that matter. You still call such a person leader even after rigging elections? I hope they will not accuse UPND for this mercy.

    • He is hiding after mugging and his day light robbery from KCM! Kawalala Lungu knows this is his last chance to steal. After getting loose change from The Post; he has now gone for the biggest robbery of our time, KCM.
      But that spells the end of his armed robbery life style because KCM will not let him get away with it. International Law will catch up with him and cannot hide anywhere!

    • The man is going to do the whole full term without a press conference a first in a democratic country….his handlers know that he is not sharp enough to answer question beyond “we are taking measures” or any national issues he would stumble like a chakolwa he is.

    • For sure ….lungu and his gang now think they can fix the economy by highjacking mines from foringners ???

  5. I still contend that PF supporters are mentally ill because I fail to understand the basis of their fanatical support for a clueless clown. All economic indicators are deteriorating, we have an almost empty treasury, an alcoholic Finance Minister, a president who only talks to cadres at the airport, a Minister under arrest but still reporting for work, load shedding is coming back in the guise of low water levels etc, nothing is improving. So please, if you are not mentally ill then can one of you explain the basis of your support?? Bene Ndanje and friends, educate me please. What am I missing??

    • @Dudelove, it you and you UPND cadres that are mentally defective. Doing the same thing over and over with same results. We are not hearing anything life giving from your leader HH, but self obsession, and flatulent carping. As for you, you are nothing more than an abusive pompous loud mouth much given to trying prevent free speech and debate on this site. People are either dull of mentally ill. Presumably that’s worse than being a cowardly social media bully.

    • Patriot, you have to understand that I feel nothing when am insulted by a person who follows a self confessed visionless fool. Means the follower of such a person is worse than the visionless fool. Articulate economic issues and not the HH and UPND rantings that you always dwell on because your useless barking will not help the economy not one slight bit. Now sit down and be the dull chap you always are, OK boy?

    • Patriot, mentally defective people are those who continue cheering a person who said he has no vision and has proved it through the state of the economy. So in essence, you are mentally defective and being insulted by someone mentally defective really does not carry any weight. Try another tactic like saying something intelligent although that will be going against your party’s beliefs of using only a tiny fraction of one’s brain.

    • ,,@Dudelove, you are a pathetic , mindless mouth piece obsessed with a loser candidate going absolutely no where. Of course you mind terribly being insulted by me because you responded. Why do you protest so much about mental health people having a democratic opinion anyway? All citizens are allowed an opinion in fact it’s a duty. Your worst nightmare really is people you don’t agree with having the right to support a party your tribal leader has failed to win over. And since you did not protest about bring a coward and a cyber bulky, I guess we have one consensus.

    • hahaha Patriot please, you are wasting your breath. I already told you I do not mind being insulted by you coz like your president you have zero substance. If insulting me makes your ka simple mind happy, then be my guest mune. You can insult my mother and father too, they are scholars so they understand tantrums thrown by tiny brained people. LOL!

    • Yes you are right by the way, all citizens are entitled to an opinion and my opinion is that all PF supporters are mentally ill. As for me responding, how else do I communicate to your feeble little mind that your insults are in vain? I use sign language? Kwena mulibapuba tata.

    • @Dudelove get some therapy. I showed this to my psychiatrist neibour and he analysed you as a really sick individual with a serious inferiority complex. You keep telling people they are dull and have small brains. Is it a scientific fact that small brains are necessarily of less intelligence than people with big brains? It’s all drivel isn’t it Dudelove.

      Psychiatrist says you have an overwhelming need to belittle people with differing viewpoint, to the point of abusive language. You also have a lack of tolerance. That your stance is to bully people to shut them down. Why? Look into that, because it suggests you are manipulative and have a fantasy you are really intelligent. A healthy person respects other people’s boundaries. Trouble with HH/UPND and cadres is that they…

    • …….. Trouble with HH/UPND and cadres is that they will use mental health institutes to lock up people to make them submissive. You guys are dangerous people and should never be allowed into power. It’s what they do n oppressive regimes.

      My dad was one of Zambias’ leading teachers, headmaster. President of teachers union (fighting for rights of um….’scholars’ that fail to raise their children to respect otners.). Respect all views, including those of mental health folk. I’ve enjoyed leading you down the garden path to expose your weakness. People need to be aware of the evil that is HH/UPND and it’s cadres.

    • Patriot

      Dwelling on HH and UPND will not fix your lungus mess of the economy …..

      From proceedings I will gladly say I would support HH to lungu any given day….

      The agony in your case is to keep being told by people that …….

      ” we told you so “

    • bla bla bla mune, say something intelligent please. You are boring now, found your !diocy amusing at first. Am sure your dad would be disappointed to learn his son sings praises for a f00l who has ruined this beautiful country with his lack of direction. That poor doctor neighbour of yours probably agreed with you coz he wanted you to leave his home fast. Lack of intelligence is a disease and he was afraid of getting it if you were around too long. haha.

    • DudeLove – Excellent analysis.

      But please, please don’t lower your intellect to the levels of Patriot by responding to him.


  6. Damn! ..What a damning assessment.
    Ati no credible policies for recovery. No significant accumulation in sinking fund for servicing eurobond .
    ..I’m trying to be optimistic but when a cabinet minister is arrested and charged by the anti corruption commission and is then allowed to carry on in his position , then all confidence is lost in our governments capabilities.! ..The guys at treasury
    & BOZ definitely have their work cut out.

  7. Instead of Mr Lungu and his friends just accepting that they have failed they are now in prison survival mode,they have no clue of how to get us out of the mess they created but they expect all of us to suffer so that they protect their loot and their freedom from jail

  8. Please Ba Moody or whoever you are called, leave Zambia and our humble great leader alone.. Our President is so humble and calm for a leader such that all the neighbors around such as South Africa are jealous of Zambia and its massive and unprecedented development ever seen in the history of Africa… Kikikikiki


    What gets me is that they give a rationale based on investors interests……incase of default. It’s to protect investors not the citizens of Zambia. They are putting constraints on our ability to thrive on the world stage. These vicious outputs from Moody’s and IMF are becoming prolific. This comes after we dealt with Vendanta, agents of the west denuding our resources and putting money in their coffers.

    Undermining economies is the new Wester agenda.

    • Having said that of rather ‘ranted’ that……. commonsense, says His Excellency must look at hard at the appointments of Finance Minister and how well they work with or reach consensus with BOZ. Is the Finance Office consulting widely enough with Economists? If so the blame is shared across the board among that group.

      I remember reading an opinion piece in the 80’s in a newspaper (could have been the Sun….!); On President Kaunda. It said, that President Kaunda, ‘reshuffled his cabinet so often, it was like shaking peas in a tin.’.

      I suggest that Minister of Finance should be reshuffled often enough responding to ‘real and noted,’ poor performance of the department.

    • And with no loss of Loyalty to you, your Excellency, in truth your problem begun with the unbridled control of Honourable Chikwanda. He begun this decent into excessive debt.

      It is true, that Zambia desperately needed infrastructural changes to grow the economy and President Sata had a good vision which included the inclusion of the poor. There has been great success but the borrowing was unthethered at the time of Hon. Chikwanda.

      Finance Ministry is looking weak, uninspiring, and confidence is poor. There is no real PR fencing off negativity from it. It ought to ‘be all over this town’ in its strenuous defence, but….phut ….. none coming!
      What to say…?

    • Hehehehe……look at patriot

      Trying to polish a turd …….no matter what kind of polish you use on sh.it , it remains sh.it…..


    • HH warned and we called him loser, under 5 and bitter.now it’s our own bone to chew.suffering is a choice we chose lungu, so y hh should be happy when he warned us.

  11. We saw it coming!
    Soon, we won’t be credit worthy to afford fuel imports!
    Copper production will e the lowest in 2019 because investors are scaling back on their operational plans!
    ECL has fully opened the gates of hades! We are in Dununa Reverse gear! Prices have gone up and never to come back down despite the worthless Kwacha artificially gaining a bit to K13.10 to a USD!

  12. Moody’s this is NOT KK’s Era.

    Whether your propaganda machinations is protracted by HH and UPND stooges “WE” in 7 provinces “WE” can’t VOTE FOR HIM to be a republican president.FULL STOP.

  13. indeed we really need to start questioning the mental state of some PF cadres these guys will rate you according to your own financial information it’s like attacking FIFA for downgrading Zambia after they keep losing continuously these guys also have a reputation to protect if government feel these guys are not truthful let it reach out to them with proper information otherwise most of you look dull

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