By Dr. Haabazoka Lubinda, Economist
Africa-Press – Zambia. When I appeared on Hot FM and gave President Hakainde Hichilema’s government a fiscal discipline rating of 9.1 out of 10, I was heavily criticised by some commentators. But fiscal discipline, properly defined, is not about politics or emotions. It is the government’s ability to live within its means, manage debt responsibly, reduce wastage, improve revenue collection, and prioritise spending that grows the economy rather than drains it.
This same fiscal discipline, combined with Zambia’s successful debt restructuring, has now led to two major international rating agencies upgrading Zambia’s credit rating.
Fitch Ratings has upgraded Zambia from “RD” (Restricted Default) to B-, and Standard & Poor’s has upgraded Zambia to CCC, removing us from the default category altogether.For the first time since the crisis began in 2020, the world is officially acknowledging that Zambia has come out of economic distress and is now on a clear upward trajectoryWhat Exactly Is a Credit Rating?
A credit rating is like a financial scorecard that tells the world how trustworthy a country is when it comes to paying back its debts.
It is determined by global agencies such as:
● Fitch Ratings
● Standard & Poor’s (S&P)
● Moody’s
These agencies examine a country’s economy, political environment, government discipline, debt levels, inflation, and currency stability. They then assign a score that ranges from very strong (AAA) to very weak.
A good rating makes it cheaper and easier for a country to borrow. A poor rating makes borrowing difficult and expensive.
Zambia’s move from default level to the B- and CCC bracket means we are no longer viewed as a country in financial chaos, but rather as one that is stabilising and regaining credibility.
Why the Upgrade Happened: Understanding the Key Drivers
1. Debt restructuring is almost complete
Zambia has restructured or agreed on restructuring for 94% of all external debt. This includes:
● The full USD 3.8 billion Eurobond restructuring
● Almost all commercial debt
● Nearly all bilateral obligations
Only a small remainder, about USD 44 million, is still being negotiated. Creditors now believe Zambia can pay its obligations.
2. Debt levels are falling
Government debt is projected to drop from:
● 114% of GDP in 2024,
to
● 93% in 2025,
and 85% in 2026.
This is a dramatic improvement and a major reason for the upgrade.
3. Interest rates on external debt have collapsed
Before restructuring, Zambia paid around 7.5% interest on external loans. After restructuring, we will pay below 1.5%.
This means more money stays in the economy instead of being sent abroad to creditors.
4. Strong economic growth is returning
Fitch forecasts:
● 5.2% GDP growth in 2025
● 6% growth by 2027
Mining, agriculture recovery, improved energy supply, and private sector expansion will fuel this growth.
5. Inflation is expected to fall
Inflation is projected to decline from 15% in 2024 to:
● 14% in 2025
● 10% in 2026
● 8% in 2027
Lower inflation means stable prices for citizens.
6. Credibility and stability have been restored
Through fiscal discipline, anti-corruption efforts, and strict adherence to macroeconomic reforms, government has demonstrated seriousness in managing public finances.
This is why Fitch stated that Zambia has “normalised relations with commercial creditors.”
What Does the Upgrade Mean for Zambia?
1. Cheaper borrowing for government
A better rating reduces Zambia’s future interest costs.
This frees up money for:
● Schools
● Hospitals
● Infrastructure
● Energy projects
● Social services
2. More foreign investment
Investors take credit ratings seriously.
With the upgrade, Zambia is now seen as:
● Safer
● More stable
● More predictable
This attracts new investment in mining, agriculture, real estate, energy, and manufacturing.
3. A stronger kwacha
Credit confidence increases demand for the kwacha, helping stabilise and strengthen the currency.
4. Lower inflation over time
A stable currency and lower debt service costs help reduce inflationary pressure.
5. Job creation
When investment increases, companies expand.
When companies expand, they hire.
This is how improved ratings translate into real jobs for Zambians.
When Should Citizens Expect to Feel the Benefits?
Economic improvements do not transform livelihoods overnight. But the benefits follow a clear timeline:
Immediate effects (0–12 months)
● Kwacha strengthens or stabilises
● Business confidence improves
● Lower inflation begins to show
● Government debt service pressures reduce
● More investors begin assessing Zambia
Medium-term effects (1–3 years)
● Job creation increases as investments turn into actual projects
● Government spending on social sectors rises
● Reduced cost of borrowing leads to more infrastructure development
● Inflation and interest rates fall further
Long-term effects (3+ years)
● Higher, stable economic growth
● Rising household incomes
● Improved public services
● Consistent access to affordable goods
● Less pressure on taxes
● More private sector-led development
● Stronger local currency
How Will Citizens Feel the Improvement in Daily Life?
Here are the practical signs that ratings upgrades bring:
● Cheaper loans for SMEs, farmers, and households
● More jobs as new investors enter mining, manufacturing, logistics, ICT, and construction
● Stable prices for mealie meal, fuel, and essential goods
● A stable kwacha, which protects savings and salaries
● Government paying suppliers on time, stimulating the economy
● Better roads, energy supply, and infrastructure due to cheaper government financing
● Expansion of power generation, reducing load shedding
In short, as Zambia’s credit rating rises, cost of living pressures decline, economic stability improves, and opportunities grow.
Zambia Has Come Out of Crisis
The upgrades by Fitch and S&P are not political statements. They are independent global financial assessments confirming that:
● Zambia is no longer in default
● Debt restructuring is essentially complete
● Growth is returning
● Inflation will fall
● The economy is stabilising
● Fiscal discipline has brought credibility
● Zambia is on a recovery path
In other words, the economy is no longer in crisis; it is now on an upward trajectory.
The hard work of the past four years is beginning to show results.
With continued discipline, policy consistency, and investment in productive sectors, Zambia can look forward to a more stable and prosperous future.
Source: The Zambian Observer
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