Africa’s second largest copper producer Zambia had its credit assessment lowered further into junk status by Fitch rating agency. This was according to a note released on the rating agency’s website on 27 June. The copper producers issuer default rating is now pegged at CCC from B- (negative outlook) in October 2018.
The rating agency cited the government’s high external financing need coupled with dwindling foreign exchange reserves that increase vulnerabilities to external shocks and rising public/external debt. This rating comes a month after Moody’s downgraded Zambia’s credit rating to Caa2 (-ve outlook) from last years Caa1.
Balance sheet vulnerabilities have persisted in the Southern African nation that still grapples with the task of closing an IMF package for $1.3 billion in balance of payment support.
Credit default spreads on Zambias dollar bonds remain the widest in Africa and of frontier market Eurobonds at an average of 1,670 basis points with yields pegged at record highs of 16.5% – 18.9%.
Fitch attaches a very low likelihood of an IMF program and an infinitesimal narrowing of the 2019 budget deficit to 7.2% and 6.8% in 2020 (above budgeted estimates).
Expected in the next coming weeks is Standard and Poor’s (S&P) that assessed the copper producer in May with the assessment report yet to be shared.
Compiled by Oscar Meeander