ZAMBIA’S institutional strengths and solid growth prospects remain sufficient to offset increasing short-term fiscal and external challenges, says Zambia Standard &Poor Rating Services.
However, the body says that policy-making could be constrained by political considerations, preventing the final resolution of key fiscal uncertainties, which could add to copper-price led currency depreciation and external pressure.
“The outlook remains negative, reflecting increasing uncertainty over Zambia’s management of public finances and external accounts. We are affirming our ‘B+/B’ sovereign credit ratings on Zambia,” it says
According to its website, the negative outlook reflects increasing uncertainty over Zambia’s public finances and external accounts.
“We could lower the ratings if the Government’s policy stagnates and leads to a further deterioration in Zambia’s fiscal position.
“Similarly, we could lower the ratings if external pressures further strain Zambia’s external accounts.”
It says however that it could revise the outlook to stable if policy uncertainties are resolved constructively, leading to improved mining sector activity and structural improvement in public finances. It could also consider revising the outlook to stable if its assumptions concerning the weakening external metrics, in part because of a weaker kwacha, prove too conservative, and Zambia instead displays a stronger-than-anticipated external performance and reserve position.
“On March 27, 2015, Standard & Poor’s Ratings Services affirmed its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings on Zambia. The outlook is still negative,” it says
It further says that since its last review in October 2014, Zambia’s fiscal challenges have increased and the external environment has deteriorated, partially due to a fall in copper prices.
Despite these intensifying and increasingly interrelated challenges, Zambia Standard & Poor Ratings Services affirmed its ratings on Zambia because it believes that a relatively stable political environment and continued strong growth prospects act as a counterbalance.