International rating agency Fitch has adjusted Zambia’s Foreign Currency Long Term Issuer credit assessment to ‘CC’ from ‘CCC’ according a note carried on its website. The rating agency has cited widening default risk fueled by COVID19 disease pandemic effects adding to already existing fiscal vulnerabilities. The copper producer is faced with falling copper prices, depleting reserves and an increasing debt service burden widening its fiscal deficit forecasts.
This downgrade comes barely a fortnight after Moody rating agency downgraded Zambia’s rating to Ca with stable outlook from Caa2 with negative outlook.
Zambia earlier approached the International Monetary Fund (IMF) with a Request For Proposal (RFP) as it considers debt reorganization options which sent credit spreads on its dollars bonds above 6,700bps for bonds maturing 2022 and 4,400bps on its 2027 paper. Amidst a coronavirus pandemic the copper producer is in talks with multilateral for possible relief funding.
The credit risk environment remains elevated for Zambia as energy, currency and interest rate risks persist. The red metal producer is forecast to grow below 2% a revision provided by its MinFin earlier in March.
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