FITCH’s downgrade of Zambia’s economy to negative from stable underlines the importance of the government implementing its policies in a consistent and transparent manner, says the International Monetary Fund.
Fitch Ratings has revised the outlook on Zambia’s long-term foreign and local currency Issuer Default Ratings (IDR) to negative from stable and affirmed both ratings at ‘B+’.
Fitch has simultaneously affirmed Zambia’s short-term IDR at ‘B’ and Country Ceiling at ‘BB-‘.
The downgrade of the economic outlook which comes barely a few months before Zambia issues the US$700 million bond was attributed to Fitch’s concerns about the direction of economic policy.
The downgrade rattled finance minister Alexander Chikwanda who described it as an “inglorious opinion” for Fitch. Commenting on the development, IMF resident representative Perry Perone said Zambia needed to streamline its communications to the market as the government would be subjected to the “discipline” of international markets.
Last June, the World Bank reclassified Zambia a lower middle-income country, a move analysts say would see traditional donor concessional financing gradually diminishing while the country relies more on international capital markets for borrowings.
Perone said Zambia was looking to access international capital markets and it was to be expected that potential investors would increasingly scrutinise government policies.
“Rather than conditions stipulated in the context of multilateral and bilateral concessional loans, the government will be subjected to the discipline of international markets,” said Perone in an interview.
“In this regard, the revision to the Fitch rating underlines the importance of the government implementing its policies in a consistent and transparent manner that is in accord with the legal framework and explaining clearly its actions.”/POST