Moody’s downgrades Zambia government issuer rating to B2

The rating agency Moody’s Friday September 25, 2015 downgraded Zambia government issuer rating to B2 from B1. The outlook on the rating however, has been changed to stable from negative.

According to Moody’s the key driver for the downgrade is its expectation of a sustained deterioration in fiscal and debt metrics that is unlikely to reverse over the course of the three to five year rating horizon given the challenges stemming from a lower growth environment amid an extended period of weak commodity prices, constrained copper production, and domestic electricity shortages constraining business activity.

“The stable outlook reflects our expectation that, despite the continuing deterioration in the country’s key fiscal and debt indicators, Zambia’s credit metrics will remain aligned with B2-rated peers,” Moody’s says, adding that the stable outlook also balances the downside risk of a more pronounced weakening of the country’s public finances and international balance of payments position, against credit supports such as a track record of political stability, responsive monetary policy, and banking system stability.

The agency says it has concurrently, lowered Zambia’s foreign currency bond ceiling to Ba3 from Ba2, its foreign currency deposit ceiling to B3 from B2, and its local currency bond and deposit ceilings to Ba1 from Baa3.

By Emmanuel K. Dogbevi