Moody's downgrades Zambia

Moody's Investors Service said it downgraded Zambia's government issuer rating to B2 from B1, foreign-currency bond ceiling to Ba3 from Ba2 and local-currency bond ceiling to Ba1 from Baa3 and changed the outlook to stable from negative.

The agency said the key driver for the downgrade is Moody’s 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 the agency’s 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. 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, Fitch said.

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