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Alba Iulia
Thursday, November 26, 2020

Zambia’s debt burden to exceed 110% of GDP this year- Moody’s

Headlines Zambia’s debt burden to exceed 110% of GDP this year- Moody’s

Rating agency Moody’s has predicted that Zambia’s debt will go beyond 110% of its Gross Domestic Product this year.

Moody’s expects the persistently large budget deficit and exchange rate depreciation to push the debt burden above 110% of GDP this year.

In its annual report, Moody’s says the huge push will be caused by the persistently large budget deficit and exchange rate depreciation.

Moody’s also predicts that Zambia’s sovereign credit fundamentals will remain very weak for the foreseeable future.

It says Zambia’s very weak credit profile (Ca stable) reflects unsustainable debt dynamics and heightened liquidity and external vulnerability pressures in the context of exceptionally difficult global conditions.

“The weaknesses in Zambia’s credit profile have left it extremely vulnerable to acute risk aversion and a prolonged period of low commodity prices linked to the coronavirus,” said Daniela Re

Fraschini, a Moody’s AVP-Analyst and the report’s co-author said, “This increases the likelihood of a sovereign debt restructuring to address its debt sustainability issues.”

The report says Zambia’s fiscal deficit again exceeded the budget target in 2019, largely because of higher than planned interest payments and capital spending, as well as support for the farming sector.

It says the fiscal slippage will continue in 2020 because of the coronavirus pandemic, while debt affordability continues to weaken.

It added that the slippage and accumulation of arrears underscore Zambia’s weak government effectiveness,which has prevented quick and decisive policy action to confront the challenges stemming from rapidly increasing debt.

“While debt restructuring has become Moody’s baseline scenario under these challenging conditions, the stable outlook on Zambia’s sovereign rating reflects a potential contrast in outcomes for private-sector creditors because a re-profiling of some non-commercial debt could limit their losses.

It says smaller losses for private-sector creditors than implied by the Ca rating as part of a debt restructuring could lead to a higher rating.

“Conversely, a lower rating would result from the increased likelihood of investors facing larger losses than implied by the Ca rating as part of a debt restructuring that Moody’s would consider to be a default under the rating agency’s definition.”

28 COMMENTS

  1. Crooked I 

    “…The Debt burden for the United States is 114.04%. Am just saying…”

    That’s like saying if an elephant can cross a deep long river so can any animal..

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  2. The economy is now rotten and PF thieves will defend their fellow thugs and thieves.

    PF must go!

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  3. America borrows money in its own currency even whn they borrow abroad while Zambia can only borrow in its own currency locally. And that alone makes all the difference. Our debt burden is influenced even by the exchange rate.

  4. Its happening every where even in your so called rich countries like UK due to effects of covid, you moody angry sad c.u.nts

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    • What dimwits when we are in power. The dimwits are those who continue fielding the same loser over 4 elections, but expect a different outcome. Very dull

  5. Thanks to the great leadership of his excellence president edgar chagwa lungu!
    For perspective, when MCS died our debt was less than 20% GDP. When Mwanawasa died it was negligent. I wonder what it will be when lungu dies. Probably our GDP will be 20% of the external debt!

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  6. “It added that the slippage and accumulation of arrears underscore Zambia’s weak government effectiveness,which has prevented quick and decisive policy action to confront the challenges stemming from rapidly increasing debt.” This statement aptly sums up Zambia’s leadership quagmire.

  7. The UK is borrowing at historical low level of interest rates and the percentage of debt servicing is a very small fraction of the total revenue. Contrast that with ZED.

  8. The rating is giving You an outlook to see measure up and control to manage You already you’re your forecast that budgeted revenues estimated may fall short of target by close to 15% GDP would shrink by 2.6% this year 2020 in more than 20 years The risks and outlooks could cause uncertainty hence that pointer to moderate Fluctuations in rates and interest rates can cause unexpected losses, unfavorable transaction costs across markets and fixed incomes by an appropriate portfolio duration target measure set with those Treasury futures and debt restructuring strategies will help return to sustainability on key maturity points while maintaining control risk exposure. Taking advantage of trades now in commodities and resources that have seen prices on the rise will help…

  9. US debt is in long term government securities purchased by China(under 0.75% yield or interest rates )
    Zambias Eurobond debt and debt to China has interest rates in excess of 9.5%.
    The MMD left a debt of only $2.5 billion.
    Under ECL and the PF , Zambia has close to $20 billion in national debt(5 times the total debt of Rwanda)

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  10. At what time is the Zambian taxpayer compensated for the loss of income that went with not taxing the mines, and instead taking on Eurobond debt?
    This is fraud. These debts are Odious Debts.

    This is the time for

    1. A debt Jubilee
    2. Suing the mining companies for tax evasion
    3. Taking back the mines, and develop the country from the sales of copper, which what should have happened 30 years ago.

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    • AGREED! THATS THE SOLUTION. But we talking to walls here…..!

  11. Lungu’s entire presidential term has been one long economic slide – growth down, exchange rate down, reserves down, credit ratings down,exports down.

  12. You have invested those debt proceeds hoping to grow the economy and roll Without the infrastructure debt financed the quality of our economy and basics couldn’t have been better to attract meaningful FDIs to performance the economy You look at the value created and see the real options there’s in the economy to restructure reposition or repay You owe china USD 3 B ,COMMERCIAL USD3 B IMF USD3 B AND OTHERS USD2B The structure of the debts is not poor and difficult to restructure When you look at the economy you see the real and potential GDP When you do that you see the euro bonds trading now at .5 cents to a dollar to receive higher rating from issuers maybe it time you marketed the Zambian economy and the key in that its the workforce…

  13. It’s hidden in the properties mushrooming all over the country. KZ is openly boasting on here that he has several homes so there is your start point. Match his salary to accumulated wealth and if they don’t match then let’s start to bring the deficit down by confiscating state property.

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  14. @ Joe (13). Zccm-ih has failed to run a limestone quarry namely Ndola lime. It has gone into liquidation after a fraudulent procurement of a dysfunctional kiln from an Italian firm that has since gone bust. 100m USD down the drain and no one has been made to answer for the crime. What makes you think zccm-ih or IDC can run complex copper mines?

  15. Beeep, beep, “this is illogical,” says the robot spinning round and round.

    Why do UPND, cadres see this as a govt performance issue? ALL GOVTS EVEN IN THE WEST HAVE THE SAME PROGNOSIS! They are printing money as stimulus solution. Britain is mulling over a ‘double dip’ depression. World economists have been calling out, a recession, depression worse than ww11. Even if they come in power (by miracle), UPND cannot manage this global challenge any better.

    So, what is the point of connecting govt performance to this economic bleep due to harsher global conditions?? The small but understood threat that austerity measures be taken and a dark warning that if investors make losses on their ‘speculations,’ a worse rating will be made….because Moody’s will “consider it to be…

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    • So, what is the point of connecting govt performance to this economic bleep due to harsher global conditions?? The small but understood threat that austerity measures be taken and a dark warning that if investors make losses on their ‘speculations,’ a worse rating will be made….because Moody’s will “consider it to be a default under the rating agency’s definition.”

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  16. manufacturing output has fallen india 55% South Africa 50% EU 20% AMEX 20% and here it should reflect the cyclical nature Now the point in the rating rationale here is that you manage your exposure and maximize the returns

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  17. The wise think is to build credibility amidst the head winds stick to your credible financing plans in refinancing and restructuring engage bond holders with that backed by lazard advisory because at .5 cents to a dollar bond holders will need to accept a high haircut With a credible plans duration s will be lowered yields will ?compress and our restructuring will be smoothly listen to ratings and reinforce those credible plans he IMF’s latest Economic Outlook for sub-Saharan Africa is considerably worse than its April outlook and is subject to massive uncertainty. Economic activity this year is now projected to contract by some 3.2 percent, reflecting a weaker global economy

  18. Whats important is a credible plan for the restructuring and refinancing to be smoothly achieved at minimal costs especially at .5 cents per dollar bonds could be trading for investors to accept such an adjustment or what you call hair cut most investors are willing to support zambia in the restructuring especially with th advisory support in place

  19. The wise think is to build credibility amidst the head winds stick to your credible financing plans in refinancing and restructuring engage bond holders with that backed by lazard advisory because at .5 cents to a dollar bond holders will need to accept a high haircut With a credible plans duration s will be lowered yields will ?compress and our restructuring will be smoothly listen to ratings and reinforce those credible plans he IMF’s latest Economic Outlook for sub-Saharan Africa is considerably worse than its April outlook and is subject to massive uncertainty. Economic activity this year is now projected to contract by some 3.2 percent, reflecting a weaker global economy

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