Other rating agencies – S&P and Fitch are on the lookout for Zambia in light of balance sheet vulnerabilities
Moody’s rating agency has advised in a note that Zambia’s sovereign rating could be revised lower if the credit risk environment deteriorates. The copper producer was last rated Caa1 (stable outlook) last July. Zambia currently grapples with rising external (of $10.05 billion) and domestic debt in arrears (of K15.5 billion) which are impacting liquidity and ultimately adversely affecting the credit environment.
Moody’s Analyst Daniella Re Fraschini forecasts that the copper producers debt to gross domestic product will approach 75% by year end. This is from levels of around 62% (in 2017).
“Debt affordability is weak relative to peers and fiscal policy credibility is limited, diminished by a series of fiscal slippages,” she said.
Moody’s further cited a delayed IMF program as one area Zambia has struggled with to acquire balance of payment support for its budget.
Earlier in the week credit default spreads on Zambia’s dollar bonds rose to the widest of all its peers with an inverted yield curve signalling investor jitteriness in the market. Zambia’s 2022’s and 2024’s are yielding between 15%-18%.
Some analysts across the globe have also warned that S&P and Fitch rating agencies could be watching Zambia similarly.