Fitch rates Zambia’s newly restructured debt as junk – reflects country not yet out of the woods

Fitch rates Zambia’s newly restructured debt as junk – reflects country not yet out of the woods

Global rating agency Fitch has assigned Zambia’s US dollar bonds, which were issued on 11 June 2024 to replace the defaulted ones under the debt restructuring deal a ‘CCC+’ rating.

This rating is a notable improvement for Zambia coming from a default status which the country hit as post pandemic economic impact weighed in. This improved rating comes after the country’s successful debt restructuring exercise.

However, this CCC+ rating is considered as junk when looked at from a global investor perspective. The junk status though better than default status means more needs to be done for the country to once again begin to attract foreign capital.

The government of Zambia will have to work on improving key economic variables such as local revenue mobilisation, cutting down on unproductive expenditure to reduce on budget deficits.

These and other measures will help the country successfully service the international debts to get the country to at least BBB, considered as investment grade.

Additionally, Fitch through it’s Hong Kong office also affirmed Zambia’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at Restricted Default (RD).

Restricted Default (RD) re-affirmation for Zambia under long term foreign currency means that the country can not issue new Euro bonds until economic fundamentals improve.

Fitch credit rating scale for issuers and issues is expressed using the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade) with an additional +/- for AA through CCC levels indicating relative differences of probability of default or recovery for issues.-Zambian Business Times