Zambia features on AfDB’s watchlist, as sovereign risks ebb higher

Africa’s second largest copper producer, Zambia, on 23 December appeared on the Africa Development Banks’s (AfDB) watchlist for a delayed $1.4millon obligation within a 30 day tenor. To this effects the African lender (AfDB) will suspended any further disbursements to Zambia in this regard. The red metal producer grapples with rising debt and balance sheet vulnerabilities which has cost it a bail out package with the Washington based lender the International Monetary Fund (IMF).

The Zambian authorities confirmed having been written to by the AfDB team on 15 December reminding them of the outstanding obligation. In a press release from the MinFin dated 24 December, Zambia delayed the repayment due to currency depreciation which inflated the Kwacha needed to raise the dollars to absorb the obligation. The MinFin assured the public that the government was currency processing payment to make good.

Barely a week ago Fitch rating agency affirmed Zambia’s foreign currency long term issuer risk rating to CCC on account of a weakening fiscal position and actualizing risks to growth. Amidst a fiscal quagmire Zambia is faced with an energy crisis which has suppressed growth in the year 2019 to under 2%.

The Kwacha Arbitrageur