ZAMBIA’S CREDIT PROFILE CONSTRAINED - MOODY

MOODYS Investor Services for Zambia’s credit rating has maintained a ‘Ca’ rating despite analysts’ expectations of a selective default as other rating agencies.

A week ago, Standards and Poor’s (S&P) lowered Zambia’s fiscal rating to Selective Default (SD) given default risks and fiscal fragilities.

Zambia’s credit profile is constrained by its liquidity and external pressures, which the pandemic has intensified and that limit its capacity to service debt, says Moody’s carried in its credit opinion.

Moody indicated that the rating captured Zambia’s approaching default and that its expectation that a subsequent likely debt restructuring would result in large losses to private sector creditors.

“The rating also reflects institutional weaknesses that have prevented effective and timely policy actions to confront the challenges stemming from a rapid increase in debt.

“We expect a widening fiscal deficit and significant exchange rate depreciation will push the debt burden toward 120 percent of Gross Domestic Product in 2020, from close to 100 percent in 2019,” Moody said. Commenting on this, the

Kwacha Arbitrageur Magazine said, Zambia was in the middle of debt restructure negotiations with Eurobond holders and Chinese creditors for a potential standoff of obligations to earn it reprieve that would allow Zambia effect a V-shaped recovery in 2021.

“Dollar bond holders extended a vote to 14 November following failure to reach quorum which gave a life line to the Southern African nation for a few weeks which has seen debt deferment by China Development Bank to April 2021 and appointment of Preya Sharma as IMF resident representative for Zambia,” the Magazine said.