Implication of the Downgrading of Zambia by Moody’s
The international rating agency Moody’s has downgraded the rating for Zambia as an issuer from B2 to B3. The agency has also changed Zambia’s economic future outlook from stable to negative.
What are the implications of these changes?
Firstly, this means that global financial institutions will be skeptical about Zambia. The higher perceived risk means the interest rates of lending to Zambia will be increased, thereby making our external debt more expensive to service through higher charges. Bear in mind that our Ministry of Finance already needs to pay around US$21 million each month on the interest alone for the three Eurobonds contracted under the PF Government.
Secondly, the current holders of Kwacha denominated instruments will get rid of them. This will mean the weakening of the Kwacha. So the little gains made by the Kwacha over the last fortnight will be eroded.
Thirdly, in a bid to stem this, the Central Bank (BOZ) will have to increase or maintain our already high interest rates. This means that access to credit by local businesses, especially our Small and Medium-sized Enterprises (SMEs), will remain difficult, holding our economy and job creation prospects back. Banks will likely increase their interest rates further or cut borrowing altogether in the context of the uncertainty around further spending by Government, especially during the upcoming election campaign period.
In its statement, Moody’s has attributed this fall in the rating in large part due to problems with fiscal policies, especially Government maintaining high levels of expenditure despite reduced income. This strain on the budget has been made all the greater due to the failure of Government to put in place policies that can generate more income to the state.
Yields on Zambia’s US$1.25 billion Eurobond sold in July have climbed to 11.4 percent from about 9.4 percent at the beginning of August 2015. This is a result of increased pressure on yields meaning that investor expectations of profits are high because the risk is high. A similar situation can be observed on the Kwacha that has depreciated by 41 percent against the dollar this year, more than any of the 150 currencies tracked by Bloomberg.
The reaction from the Government and the Ministry of Finance is a laissez faire approach, meaning that they want to treat this as business as usual. The PF is seeking to hoodwink the people into thinking that things are normal and that the Government is in firm control of the country’s finances, while it increases expenditure in the run up to elections. This is a betrayal of our local entrepreneurs and SMEs, of hard working citizens, those looking for jobs, and our children who will be the ones paying back these escalating debts for years to come. The time has come for a Government ready to face up to economic realities and take action to protect our future.
Geoffrey Bwalya Mwamba
UPND Vice President for Administration
Sad situation for the country. After implication, it helps to put solutions to overcoming such problems. As simple as that, you become a better option for the people!
PF will now say HH has shares in Moodys.
This is a well articulated and thought after analysis from GBM. I don’t know the man and I didn’t think he is capable of analyzing economical and financial issue this good. Reading this sounds like a daily statement that I receive from my ForEx company. Was this really written by him and someone did it for him? If it is him, he’s definitely showing signs he’s fully qualified to be a Veep. Well done GBM!
Now wonder GBM is rich…this guy understands money issues….not a suitcase full of Jameson!!
Somebody without a doubt wrote this article for GBM.
What more should you expect if your CEO is a chakolwa from Chawama????
THE INTERESTING PART IS THAT WHEN THERE’S A GAIN SOME “ZAMBIANS” WHO CLAIMS HAVE THIS COUNTRY’S BEST INTEREST AT “HEART” KEEPS SHUT AND SEEMINGLY HATES THE GAIN, WHEN ECONOMIC FALL LOOMS THEN THEY COME OUT ELATED AND READY TO TALK TO THE NATION IN AN ELATED FASHION WITH A SHOW OF “KNOWLEDGE” & “WISDOM”. I WOULD BE VINDICATED IF I SAY MOST RENOWNED POLITICIANS PA ZED ARE CHILDISH!!!
Kikikikikiki, yaba! Who are you kidding? Someone wrote thís for GBM…………..pwa ha ha ha.
ECONOMICS HAS GONE TO THE xxxxxxxxx NOW! MAMANE. ALL UNDER 5 MEMBERS HAVE BECOME ECONOMISTS! KIKIKIKIKIKIKIIKI
@1.6 WHAT YOU HAVE SAID IS TRUE. OUR ‘ECONOMISTS’ ARE VERY HAPPY TO DISCUSS THE COUNTRY’S ECONOMIC BLUES. MORE VOCABULARY AND INTELLECT IS EXHIBITED WHEN OUR ECONOMY IS NOSE DIVING. THERE’S NO SUCH INTELLECT AND KNOWLEDGE WHEN WE ARE HAVING AN ECONOMIC BOOM TIME. IN THE WESTERN WORLD THE ONLY TIME YOU HEAR, READ AND WATCH ABOUT AFRICA IS WHEN THERE’S BAD NEWS IN AFRICA. ALL THE GOOD THINGS THAT HAPPEN IN AFRICA ARE NEVER REPORTED. IT MAKES SAD READING WHEN THE ONLY TIME ECONOMISTS COMMENT ON AFRICA IS WHEN IT’S ECONOMY IS DOING BADLY. I DON’T NEED A LOT OF BAD NEWS FROM AFRICA. I HERE IT EVERYDAY IN THE WEST BY BRILLIANT REPORTERS ON ‘DARK’ AFRICA. PLEASE, COMMENT EVEN ON ZAMBIA’S ECONOMY DOING GOOD.
GBM is truly a Genius. Abamano abo hahaha. Come to think of it, if Guy Scott who formed PF has left the party why should i remain in PF. Mpaka litente Mpaka litulike
In bemba they say “kalia usulile ekopa noko”
People think GBM is dull man yet same man has employed accountants, marketing specialist, mechanics, drivers, sales people. Not sure number of people employed but may be in 100s. Besides he makes money more than us who are so called educated. Big difference exists between being smart and educated. Most educated people have nothing to show but certificates hanging on the walls and boasting.
What a failed state.
Thank god we got our money out of this sinking/stinking ship last year!
At least, we can watch Zambians suffer piecefully from abroad.
its good you took your money to India… am sure you will be helpful in building the temple which collapse as we try and build our state as well.
Thank god we got our money out of this sinking/stinking ship last year!, Mr. Patel such remarks are uncalled for…..Our God is able n Zambians will nvr suffer coz our hope n trust are in the Almighty God and in His own time God makes all things Beautiful, Zambia will rise again mark my words
Patelo, pumbafu. Every nation has gone through such before and yes, it’s because of our poor leadership in Zambia. However,the point am trying to put across is that this country has made you money which you externalised and now you have the audacity to insult us? Don’t come back Chi.kala because this situation is not permanent.
You might be right but never forget you made your money in Zambia,would you have stayed in India you would probably suffered more than the Zambians.Be happy with your money.
Hey @ Siraj Patel
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A bit rich comment don’t you think, considering the same ‘sinking/stinking ship‘ is the same where you made the said money.
Thank God you are back to your smelly and Cesspool India where you live like rats
KELVIN, I AGREE WITH YOU THIS STATEMENT WAS WRITTEN BY SOMEONE ELSE NOT GBM. THIS MAN GBM IS SO DULL AND CAN NOT EVEN WRITE A SENTENCE. BELIEVE ME I KNOW THIS MAN VERY WELL. IF HE REFUSES MY ASSERTION LET HIM REMEMBER ONE MAN WHO CALLED HIM WHEN ONE OF HIS DRIVER WANTED TO DRIVE A BUS UNDER THE INFLUENCE OF BEER. THE MAN GBM FAILED TO WRITE A VERY SIMPLE STATEMENT HE JUST STARTED BEATING AND INSULTING HIS DRIVER.
What a well written article. Straight forward with a lot of statistical data which are difficult to dis credit by an average or even educated PF cadre. GBM is money genius and can ready business trends. This to me is important than empty degree papers without social and economic returns. VIVA Team HH. come 12th Augast,2016 AKUNA KULALA until the last vote is counted and announced. We shall guard every vote for HH.
@2 Mr Siraj Pate, BUT THAT’S OUR STUPIDITY AS ZAMBIANS. WE LET ESPECIALLY INDIANS COME IN OUR COUNTRY WITH NO MONEY AS INVESTORS, WE LEND THEM OUR OWN MONEY FROM OUR OWN BANKS, THEY START BUSINESS IN A VERY HUMBLE WAY AND BOOOM, WHEN THEY MAKE BIG MONEY THEY NOW MAKE THEIR WAY TO THE WEST WHERE ANYONE CLAIMING TO BE AN INVESTOR CAN’T GO THERE WITHOUT SPECIFIED AMOUNTS OF MONEY. IT’S HIGH TIME ZAMBIA ALSO STOPPED LETTING INVESTORS WITHOUT MONEY IN THE COUNTRY.
Indians are on the rampage, it’s not only Zambia, South Africa has been ravished and rap!ed by one family from India, the Guptas. There, it’s worse than Zambia, they control who becomes minister or president of the country. They enjoy exclusive rights to use a military base to land their aircrafts from India. Be ware!
Chi color ca wiso iwe nsamya!
And what the **** do you know; the only qualification you have is your bank account. As a Zambian this should sadden you too but you want to use it to gain points with the majority that do not even understand what you are trying to understand too. what a shame Fat man!
How can international rating agency Moody have UPND language? do they share notes?
“Hellow because HH understands economics at the nth level
Brilliant analysis
He can make a good finance minister
Ahahahaha. Kikikiki. LOL. Joke of the day.
Iwe, do not be cheated. How can a grade VI make a good finance minister? Mulebako serious. This was written by another person and GBM just appended his name. GBM is trying to show HH that he is running mate material even without a G12 certificate. Ati fili ukotuleya na ba Up and Down.
Ba UPND can you sink so low to an extent of trying to potray the dull grade 6 drop out as an intellectual economist! What are you trying to achieve or who are you trying to decieve? We all know GBM can not write this article, it was definately written by some fake UPND economists and his name written at the bottom to make it seem like he knows economics, the man is so dull he can not even write a single sentence.As for that mwenye, he is a stupid cant and these are the pipo who make us hate his fellow indinas.
So what is the Solution GBM???
Look at the coefficients of interest in the ratings and see what real options there are against the assigned ratings it’s not as gloomy as painted it’s actually a ratings failure look at the investors you have in that country risk and sovereign what turnaround you can create and navigate look at the potential taxable population of individuals and entities we have ,the value of exports to long term debt we possess that in billions of dollars is the potential you have to repay the 3 USD billion when you look at the suppressed growth you can still continue and repay not to default comfortably given the good forward looking good ratio…
to international standards of foreign reserves to both short term and long-term even when you take into account the imports the notion that there will be short term payment problems is not correct analysis of debt default
Though growth is good and all want it faster it may not be that it’s a case of failure or default as other options are available in risk management such as credit default swaps or similar premium financial engineering it’s not gloomy as shown in this rate failure
Fortunately though the central bank reserve management is also good the assets cover with those liabilities is adequate in the short and long-term in…
The time has come for a Government ready to face up to economic realities and take action to protect our future.
currency and deposits there is liquidity with reserve diversifications away from one single currency helping address currency movements in the basket of major currencies to effect and continue sustaining the kwacha
There has been a build in diversified reserve allocation over a period to ensure long-term inflation is contained giving the kwacha competitiveness in the long term
Not all is lost we still have the SDRS plus some gold to look for as reference point if it comes to call as value
Zambia still has a sovereign credit ratings that is shadowy perceived to be very higher that the Stable given by Moody’s investor service…
Few investors if not all see Zambia as a stable sovereign country with good country risk profile and will still have the courage to invest in Zambia and Zambia will still continue attracting capital flows as its MARKETED AND POSITIONED very well in global economy and still is a SUB SAHARA preferred destination
This rating is a rating failure based on STABILITY without giving the deviation from the actual pointing only to a few RAMP items that a well-informed investor will still discount and invest in Zambia The reason d’être from the persistence of asymmetrical by moody is based on narrow RAMP factors that are very few in consideration of…
of government legal and debt management framework The Government macro prudential address of debt should be supported and no GOV or STATE gives up and becomes drown in the debt ratings and fell to emerge ITS ONLY AN OPINION BASED ON SPECIFIC PERIOD and not a foregone conclusion
THIS RATINGS FAILURE BASED ON FEW RAMP FED INTO THE METHODOLOGY RESULTING IN A BIASED U RATINGS DEVOID OF REAL OPTIONS IN THOSE DEBT COEFFICIENT OF INTEREST IS SIMILAR TO ONE THAT WAS REJECTED AND RELEGATED TO THE PLACE IT DESERVES BY VALUE INVESTORS WITH REAL CASHFLOWS IN ASIA IN 1997 IN ASIA IN 1997 THE RATINGS WERE SIMILAR TO THIS WHERE ONLY A FEW RAMP MACRO ECONOMIC FUNDAMENTALS ALONE WERE USED AND CONTIGENT LIABILITIES AND ONLY INTERNATIONAL LIQUIDITY CONDITIONS WHERE EMPHASISED FORGETTING OTHER RISK MITIGATING MEASURES TO ENSURE DEFAULT WAS TAKEN CAREOF
ITS THE SAME CHALLENGES THAT RUSSIA IN 1998 WITNESSED IN ITS EPISODES OF…
MIGRATING THE DEBT CONDRUMS THOSE 1998 SIMILAR RATINGS TO RUSSIAS TIMES SHOULD BE A POINT OF RESOLVED FINANCIAL ENGINEERING FOR ZAMBIA NOW AND FOREVER TO ENSURE WE RELEGATE THE SOVEREIGN AND MANAGE THE COUNTRY RISK PROFILE AND PRESERVE THE AAAA+ CORPORATES UNDER THAT CAN SURELY ABSORB THIS SOVEREIGN CREDIT RATINGS BY MOODY ITS NOT A GLOOMY FORGONE CONCLUSION AND DEFINETELY NOT A JACKET THAT FITTS ALL IN SUB SAHARA OR ASIA OR EUROPEAN ITS UNIQUE TO ZAMBIA AND THESE DEBT INSTRUMENTMENTS SHOULD NOT HOLD US RAMSOM IN VIEW OF ELECTIVES
Only a f.o.o.l will not realize that this was written by someone trying to make GBM brilliant. This man could be a successful businessman but he has no capacity to understand this situation. Ba UPND only support him for his money not brains. We know him very well. This is not his league…..
But how could you know that with certainty? It doesn’t make any difference about the issues raised in the article though.
This is what I find interesting, there you are with your degrees in business and economics advising on how to get rich and handle finances ridiculing GBM whom you say is ‘not in your league’ and yet the man has successfully put your theoretic principles to work. So it begs the question…who is more knowledgeable on these matters?
What have you done for yourself in your entire useless life. Always busy on the internet writing for PF as a cadre only to be given a mere k100 & you call yourself a genius. Be wise or you will die in poverty. Mind you it’s your responsibility to vote wisely & shape the future of our only country we call home.
This Moody stuff, how come they have become so prominent on the Zambian market all of a sudden? Who is hiring them to cast such skewed picture?
Economy downgraded under Lungu’s watch. We told you. But you would not listen.
This analysis is very shallow and hollow I expected to have a balanced story but its all in vein. A good topic turned into mere political rant. The author should have demonstrated how the grading was done and in issues of negative perceived growth the author should have convinced readers by using the Tailor rule to show that target output was not achievable. He needed to balance this story by also talking about the possible effects on the policy rate and the circulation of liquidity in the system. We shall not agree to biased and bush economics. Let’s be real gentlemen and help the masses comprehend. All these negativities are as a result of negative information in the efficient market. I wish I had time I would have lectured more!
negative information coming from carless talk of ritual murders has affected our stock markets and the value of securities on LUSE and exchange rates have been affected.
@Kasama, This is a celebration in anticipation of benefits from the fall of Zambia. There is nothing to debate with these people. Left is right and right is left. No energy.
This is what bothers me, no opposition in Zambia, except the early MMD has actually stood for the good of our economy even in hard times. Even early chiluba asked Zambians to tighten their belts.
If any citizen sees Chikwanda, in public yell speech, speech, speech! We would love him to tell and comfort us again, how he borrowed within reason.
Who celebrates their country’s downturn. As much as I dislike Mugabe, he did one of God’s tasks by teaching not to respect the devil’s European off spring. Let us as Africans work harder it is that easy.
so most of you believes that its GBM who articulated the issues above NO its just of the UPND cadres who want to paint dull grade six drop out GBM to be intelligent
Comment: Most of the illiterate people come from rich families.
This is a rating done by man I thank God because His rating for my country is not even closer to this. It is far much better. Man will tell you that this year the will be a drought but God will give you rains. Authors of such reports are just shooting in the dark.
What time will gbm meet kambwili?
HHHHMMMM! YOU ARE THE ONLY ONE WHO HAS HEAT THE NAIL ON IT’S HEAD. OR HAVE YOU? THE ARTICLE ABOVE IS BUT PART OF PREPARATION AND DEFENSE MECHANISM FOR MEETING KAMBWILI. WHOEVER WROTE GBM’s ARTICLE HAD ADVISED HIM TO HAVE SOMETHING LIKE THAT ON THE MEDIA AS HE IS LIKELY TO GET A LOT OF ANSWERS FOR DEBATE ON THE ECONOMY FROM BLOGGERS. THE ADVICE WAS BRILLIANT. BUT, SOME OF THESE THINGS ONE SIMPLY NEEDS TO HAVE ATTENDED CERTAIN LEVELS OF EDUCATION TO UNDERSTAND THEM. THIS IS SELF-SUICIDE ON THE PART OF GBM BECAUSE ON THE DEBATE DAY VIEWERS WILL BE USING HIS ARTICLE AS A BENCHMARK FOR QUESTIONS TO TEST HIS DEEP UNDERSTANDING OF ECONOMICS MODELS AND PRINCIPLES. FOR ME HE SHOULD HAVE JUST BEEN PLAIN.
GBM has hired an economist to write the analysis for him. The man wants to be the VP desperately.
I can see that the debate between our GBM and Chimbwi Kambwi will be hot.Sorry GBM’s debate aganist Mbwinda will be a walk- over
It reminds me of one debate in parliament during MMD times between MP Ntondo Chindoloma and Finance Minister Ronald Penza. Chindoloma rose on a point of order to correct Penza. Penza’s response was “bamulembeleko fye”: it was all just written for him because he could not by himself articulate it. Then Chindoloma countered Penza by telling him “naiwe bakulembeleko fye”: What you have been saying has also just been written for you. Ba GBM bena bakopo. What is written above was just written for him hoping this will be more than the Grade 12 certificate to make him running mate for Kalusa Kadansa, HH.
Zambians, written by GBM or not is not the issue here, but the contents of the article is what you should be debating on write now. I’m very sure many of you have little or no knowledge of what is being discussed hence the reason you diverge the topic to who is the true author. In any case its very common for leaders to have technocrats on their side to help them make sense of issues of importance . President Lungu is no exception. I’m sure you have heard of advisers to the president in Economics, politics, social etc.
Madumbo banamulembela. I bet anyone this analysis can’t come from GBMs mouth cos he is an empty head full of insults. It’s a PR effort by upnd for the disgraced thug who has caused them a lot of damage lately….so f.ools above are even praising the madumbo for an analysis by someone else…
You have no proof that this was written by someone else.. The fact is that the man is succesful business man should teach you one thing about the man – that he can manage his business well. And management of business, partlyrequires an understand of finances, even national & global economic trends. Yes that is why he is vp of admin with upnd, that is not a political position but a business one, there is economical finance in admnistration. That is why upnd’s house is in order – you can not tell the people that GBM. is not doing his job with upnd. He is not being paid for nothing! Unlike pf who runs their house on borrowed money, you would not hear such things with upnd, their financial standing is sound all coz of the people like GBM. If you can’t run your own house, how would you…
OKAY can he explain them the case of Argentina, a junk-rated issuer that is hoping to raise 15 $billion, its 2001 default.
Can he explain the current fortunes Argentina has realised even when it was in default in 2001
In the thick of things you still do Financial engineering and create flexibility You have now the opportunity in the YAUN bonds you can swap and still remain investments grade and avoid the fakery assigned speculative B3 that in my own view you can recabulate
You still have the capacity to meet the future financial commitments better than most of the emerging adverse conditions as the real options are much better Its not a foregone conclusion
Zambia will always progress regardless of opinions & 2016 again it’s ecl victory.
OUR LEADERS HAVE NO STRESS TESTING GIVEN THIS LITTLE MARGINITUTE OF VOLATILITY IN RATING DOWN GRADES IT BECOMES A VERY BIG HEADECH CAN THEY LEARN FROM CHINA HOW STRESSFUL THERE LEADERS ARE AND STILL SAIL THROUGH LOOK AT OBAMA OR THE VOLATILITY THAT GREECE AND ARGENTINA PASSED THROUGH AND YET THEY REMAINED FOCUSED AND DETERMINED IN THE WORST CASE COMMITTED TO ENSURE THEY CONQUERRED
SOME PEOPLE CAN ABANDON STATE HOUSE IF GIVEN IN CHANGE OR THEIR ECONOMICS WILL MAKE THEM MAD AND TO ABANDON STATE HOUSE WHEN YOU NEED THEM YAA
HH and BBM ARE WEAK LEADERS WHEN WE EXPECT THEM TO LEAD THEY CAN ABANDON AND GIVE UP LOOK AT THE COMMENTARIES THEY GIVE AND YOU CAN SEE ITS WEAKNESS AND THEY HAVE NO STRESS TEXTING TO WITHSTAND THE GLOBAL VOLATILITY THAT IS THROWN ON A COUNTRY S ECONOMY
THEY CAN ABANDON STATE HOUSE AND GIVE UP WHEN CALLED TO RESOLVE THEY LACK TRAITS OF RESOLUTE LEADERSHIP AS SEEN IN VOLOTILE CHINA BRAZIL ZIM SA AND ARGENTINA LATER ALONE US IN OBAMA EVERY CHANGE IS AN OPPORTUNITY AND TRUE LEADERSHIP RESOLVES AND MOVE THROUGH THAT IS WHY ECL IS SOBER AND BETTER OF THE TWO HE CAN BE TRUSTED
Its only in Zambia where even G6 drop outs like GBM can lecture us learned people,kikikikikiki!!!KEEP ON RANTING YOU SATAN1STS IN UPND!!ON 11/08/2016 NI PF NAFUTI NAFUTI!!!GO PF GO.”IFINTU NI LUNGU-2016!!”
EVEN THIS MOODYS FAKE RAMP AND RATINGS BECOMES A BIG BIG CONCERN THAT SHOWS WE CANNOT WITHSTAND OTHER RISK MANAGEMENT NEEDS FOR THE COUNTRY IF CREDIT RISK IN THE PACK MAKES THE WHOLE BIG ISSUE WITHOUT SEEING THE OPPORTUNITIES PRESENTED
ECL IS A SOBER AND BETTER LEADER THEN THAN HH OR BBM HE WILL NAVIGATE AND ENSURE THE OBLIGATOR ZAMBIA MEETS AND TURNARROUND AND WILL NOT ABANDON BECAUSE OF A SIMPLE SOCIAL ECONOMIC CREDIT SCORE ITS NOT THE ENTIRE ZAMBIAN RESOURCES INCLUDING THE PEOPLE WE POSSE IN SKILLS IF WE WERE TO CROWD FUND THE REPAYMENTS ITS BETTER BY FAR
YAA
Zambia is blessed with a lot of resources and great people. The copper price as for today 22nd of April, 2016 on London Metal Exchange is $6,923. This is good for our economy though the price of oil is going up as well at $46.