GOOD performance of the economy can improve ratings on the international market which is very important in wooing investors, says Economic Association of Zambia (EAZ) president Dr Chrispin Mphuka.
Dr Mphuka said in an interview that prospect ratings were very important because they had the capacity to woo investors and boost the economy.
He said another important aspect of improving ratings was by way of sound economic management especially if a country was debt ridden.
Dr Mphuka said ratings increased country’s possibilities of increasing investment because they offered higher interests which attracted investment.
“Investors will come and want to get the higher return, if you offer high rates,
“They also know that as they bring their investment that there is higher risk also; so now it just increases your costs of borrowing but it cannot turn away investors because they follow higher return,” he said.
He explained that higher interest rates signalled higher return to investors.
Dr Mphuka however cautioned that investors would never invest in an unworthy credit country because they were aware that they would not collect their returns.
“If you become completely junk at a certain level, investors will know that you are not credit worthy then at that point, it may turn away investors because they know that whether they give you the money, it’s unlikely that you will pay back,” he said.
He also said prospects ratings were interconnected with the borrowing rate because poor ratings increased the cost of borrowing.