{"id":34043,"date":"2022-11-06T21:49:14","date_gmt":"2022-11-06T21:49:14","guid":{"rendered":"https:\/\/www.africa-press.net\/zambia\/all-news\/zambia-still-remains-at-high-risk-of-redefault-in-future-moodys-2"},"modified":"2022-11-06T22:14:59","modified_gmt":"2022-11-06T22:14:59","slug":"zambia-still-remains-at-high-risk-of-redefault-in-future-moodys-2","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/zambia\/all-news\/zambia-still-remains-at-high-risk-of-redefault-in-future-moodys-2","title":{"rendered":"Zambia still remains at high risk of redefault in future-Moody\u2019s"},"content":{"rendered":"

Africa-Press – Zambia. <\/strong><\/span>Rating agency Moody\u2019s says it expects Zambia to remain subject to elevated risk of redefault in future. In a ratings update, Moody\u2019s affirmed the Government of Zambia\u2019s Ca foreign-currency and local-currency long-term issuer ratings with a stable outlook.<\/p>\n

The decision to affirm the Ca ratings balances Zambia\u2019s limited external financing sources, very weak governance, exposure to environmental and social risks, and ongoing debt default against recent improvements to the economic outlook and efforts to improve fiscal management in the context of the IMF programme approved earlier this year.<\/p>\n

Moody\u2019s says the stable outlook implies that the government\u2019s credit profile is unlikely to improve materially until after the current debt restructuring exercise is completed. It also says the expected losses to creditors remain aligned with those associated with a Ca rating.<\/p>\n

\u201cThe government is not currently servicing external private sector debt and, while it continues to meet local currency debt service obligations, risks remain elevated that some or all local currency instruments may be included in the upcoming restructuring exercise,\u201d it states. Zambia\u2019s local-currency and foreign-currency country ceilings remain unchanged at Caa1 and Caa3, respectively.<\/p>\n

The three-notch gap between the local-currency ceiling and the sovereign rating reflects the government\u2019s small role in the economy relative to peers and moderate domestic and geopolitical risk, notwithstanding relatively high external imbalances and heavy reliance on a single common revenue source in copper.<\/p>\n

The two-notch gap between the foreign-currency ceiling and the local-currency ceiling reflects Zambia\u2019s high external indebtedness and very low policy effectiveness that generate a degree of transfer and convertibility risk, notwithstanding its open capital account and track record of limited intervention.<\/p>\n

\u201cAfter borrowing heavily from a range of external creditors to finance domestic infrastructure projects, the pandemic-induced shock led Zambia to default on its eurobonds in October 2020. Since then, Zambia has ceased servicing of its commercial external debt and is seeking a debt restructuring under the auspices of the G20 Common Framework for debt relief beyond the DSSI (Common Framework). Given Zambia\u2019s unsustainable debt level and the size of the debt reduction outlined in the International Monetary Fund\u2019s (IMF) Debt Sustainability Analysis, Moody\u2019s expects bondholder losses will exceed 35% net present value at the time of the original default, consistent with a Ca rating.\u201d<\/p>\n

It adds,\u201dTo-date, Zambia has continued to service local currency debt obligations, including those to non-resident holders. Authorities are seeking to exclude all local currency debt instruments from the restructuring, citing concerns regarding domestic financial market stability and the need to preserve domestic debt market financing post-restructuring, as well as practical and legal considerations regarding the ability to isolate non-resident holders. However, the eventual parameters of Zambia\u2019s debt restructuring will be subject to negotiations between Zambian authorities and its creditors.\u201d<\/p>\n

It says, \u201cRisks that some local currency creditors will be included in the restructuring perimeter remain elevated, while Zambia\u2019s weak governance, high exposure to environmental and social risks, and vulnerability to external shocks given its heavy reliance on a single commodity export base leave all creditors exposed to risk of redefault in the future following the restructuring.\u201d<\/p>\n

Moody\u2019s expects more clarity on the details of the restructuring, including its overall size, interest reductions, maturity extensions, and treatment of local currency creditors to be outlined in a Memorandum of Understanding between the official creditor committee and Zambian authorities, which will serve as the basis for the next stage of the restructuring process: bilateral negotiations between Zambia and its individual creditors.<\/p>\n

For More News And Analysis About Zambia<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Zambia. Rating agency Moody\u2019s says it expects Zambia to remain subject to elevated risk of redefault in future. In a ratings update, Moody\u2019s affirmed the Government of Zambia\u2019s Ca foreign-currency and local-currency long-term issuer ratings with a stable outlook. The decision to affirm the Ca ratings balances Zambia\u2019s limited external financing sources, very […]<\/p>\n","protected":false},"author":84,"featured_media":34042,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[234,235,233],"class_list":["post-34043","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-africa-press","tag-africa-press-zambia","tag-zambia"],"yoast_head":"\nZambia still remains at high risk of redefault in future-Moody\u2019s - Zambia<\/title>\n<meta name=\"description\" content=\"Rating agency Moody\u2019s says it expects Zambia to remain subject to elevated risk of redefault in future. 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