Ratings agency Standard & Poor’s on Friday maintained Zambia’s B+ rating, saying that recent policy changes overall support economic growth. The agency also kept its outlook at stable, saying current economic policies would be largely maintained, with strong growth in Zambia’s main export copper. Economic growth is seen at five percent this year.
“Although uncoordinated and sometimes contradictory views by cabinet members have increased uncertainty about future economic policies in Zambia, policy changes have so far been mostly measured and supportive of growth and modest debt burdens,” it said.
“The stable outlook reflects our view that changes to economic policies will be measured, and broadly supportive of growth trends and modest debt levels.”
Fitch ratings agency earlier in March downgraded its outlook for Zambia from stable to negative, and cited worries about a move to de-register a major political party, the Movement for Multiparty Democracy, which lost power in September elections last year.
Below is the Full Statement from Standards and Poors
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Standard & Poor’s Ratings Services today affirmed its ‘B+/B’ foreign- and local-currency long- and short-term sovereign credit ratings on the Republic of Zambia. The outlook is stable. Our transfer and convertibility assessment for Zambia remains ‘B+’.
The ratings on Zambia are constrained by fairly low income levels ($1,500 GDP per capita), balance-of-payments vulnerability to swings in copper prices as copper accounts for about 80% of exports, and political risks. The ratings are supported by promising investment and economic growth trends, a fairly strong external balance sheet, and a low general government debt burden, which also benefited from debt relief and the effect on nominal GDP of double-digit inflation in 2007-2009.
We believe that although uncoordinated and sometimes contradictory views by cabinet members have increased uncertainty about future economic policies in Zambia, policy changes have so far been mostly measured and supportive of growth and modest debt burdens.
We forecast that the Zambian economy will perform well in 2012, with per capita GDP growth of just over 5%. The economy has been buoyed by an exceptional maize harvest in 2011, still-high copper prices, and strong investment in the mining sector. We project average annual inflation will decrease to about 6.0% in 2012 from 8.7% in 2011.
Despite high copper prices, we estimate that the current account surplus will slip below 2% of current account receipts (CARs) because of large imports needs. The general government deficit is expected to widen to 4.2% of GDP compared to 3.5% in 2011. We expect per capita GDP growth to remain close to 5.0% over the medium term, supported by high copper prices and generally prudent policies.
In our opinion, however, uncertainty about future economic policies has increased. Cabinet members have made several controversial statements and decisions–which have sometimes been quickly reversed–particularly about windfall tax, export tracking, and government participation in the mining sector.
We view positively the government’s objective to promote good governance and transparency. However, we are concerned that its reversals of some of the previous government’s privatizations on grounds of lack of transparency and flawed processes are perceived as partly politically motivated. In our view, this could have negative repercussions on investment and growth if investors think that the investment climate is deteriorating.
The dismissal of the central bank governor in September, when he had just six months left in his second term, and the recent ongoing debate about the status of the registration of the Movement for Multi-party Democracy (MMD) have also contributed to our impression of increased political interference.
However, we believe that most policy measures have been so far, broadly supportive of growth. The 2012 budget is expansionary, with a significant increase in capital expenditure, but we expect the deficit to narrow in 2013. The projections assume that slippages in current expenditure, in particular wages and subsidies, are limited.
We estimate Zambia has a net external liability position of 43% of CARs in 2012, which has improved since the current account has moved into surplus. Monetary policy flexibility is limited by moderately high dollarization.
The stable outlook reflects our view that changes to economic policies will be measured and supportive of growth and modest debt levels overall, despite uncertainties regarding the new administration’s economic policies.
We could lower the ratings if the new administration’s policies were to weaken external, fiscal, or monetary fundamentals, or impair copper production. We could also lower the ratings if Zambia’s external liquidity were to deteriorate significantly, for instance, as a result of an extended depression of copper prices.
The ratings could be raised if Zambia’s external liquidity were to become less vulnerable to copper prices and if investment in infrastructure were to keep per capita income growth rates at consistently high levels.
VILICHABE BWINO. GO SATA, BUT BE CAREFUL SHIKULU WITH THE ECONOMY. I LOVE YOU
S&P’s 5 percent per capita growth translates to about 7.8 percent overall economic growth; assuming population growth of 2.8 percent. This is consistent with GRZ’s growth projection of 7.7 percent. CSO just reported 6.6 percent growth for 2011. To achieve the 2012 growth target, all this industrial unrest in the mines need to be curbed,as the mining output in 2011 declined. Fiscal discipline and tight monetary policies need to be maintained.
This is good news, i know my government has taken note and more good things to come; A+ is on the way, who said investor confidence was dented; you prophets of doom.
TM nd Maxwel… the word is “maintain”… why r u excited abt maintaining a B+ wen u r da pipo who wer screaming “change” durin da elections? u shud say da government is workin if ther is improvement… u believed sata wil make thins better bt he is far frm it… look @ da kwacha jst to start wit… u r nt objective in ur comments.
Sata can do it and pliz seek the expertise of mutati and situmbeko not that useless old vocalist bob sichinga and that hypertensionist called chishimba. The two are only fit to be call boys
Thank you to those who physically play a part in maintaining the stability. We all want what is best for Zed so hope the new hands on deck take note and keep the ship sailing steadily towards progress. It is in all out best interests to support progress.
… Our… correction
The Barotse issue is yyet to be ffactored in and the rrating will dtop.
LET US HAVE FITCH NOW!
Political uncertainties loom large on the horizon with rumoured ill health of Sata,the growing threat of secession in Barotseland,the deregistration of MMD and many incosistent and ill adviced presidential decrees.The GDP growth of 5% is a climbdown from 6.5% and investors don’t like such decelerations.Things may get worse and ,quite frankly,the previous govt was much more in tune with economic takeoff than this PF govt which is more preoccupied with political goals even when they’re not in harmony with an environment needed for economic buoyancy.The PF is in a no man’s land as far as the economy goes.
Well done Shikulu. This is a very good indicator that our economy is doing well. Just train your Ministers to be more diplomatic and professional and I will probably request you to take them for training in order for them to be aligned to the PF manifesto. Ba Sata bandi, muli bashikulu and we expect you to leave a good legacy. Keep the spirit. Ebwaume ubu.
By the way, its more urgent that you work out on the kwacha strength and it is worrying.
Great report. Forget the ills of the Ngambela, the not paying of fees by MMD, it’s us the 73 + 10 people groups of Zambia that shall foster a bright future. God is for us, let us repent and none shall be against us.
How can PF turn around and laud this rating from Standard and Poor when they poo pood it when it painted a positive outlook on the economy when RB was in power? Where these not the same people who derided the B+ rating and the re-classification of the country as middle-income? You cant have it both ways pathetic fools – if you accept this classification from Standard and Poor then you are admitting that RB and his administration was on the right track and am sure that this document was compiled before the BNC declaration and Ukwas private or was it state, or was it medical or was it investment sojourn to India.
ZAMBIA IS BOUND TO DEVELOP WITHIN A SHORT PERIOD OF TIME DUE TO SATA’S SERIOUSNESS ON CORRUPTION AND THE NEED TO EMPOWER THE YOUTH. YOU CAN EVEN SEE IT IN HIS CHOICE OF INVESTORS- TRACTOR MANUFACTURERS; HOSPITALITY INDUSTRIALISTS; THE NEED TO CONSTRUCT AN ULTRA-MODERN HOSPITAL AND 600+ HEALTH CENTRES AROUND THE COUNTRY, YOUTH TRAINING CENTRES, UNIVERSITIES FOR EACH PROVINCE, REALIGNING THE DISTRICTS FOR EFFICIENT AND QUICK SERVICE DELIVERY, ETC. FOR A START, THIS IS ALL WE NEED.
Peter? how many of those have been emplimented? r u still dreaming or in campaign mode? Sata has nit fulfiled anythin he claimed he would in 90days… dint u see wats up…?
@Kaponya Still Waiting; I agree with you entirely. It’ll be interesting to see how Wynter Kabimba and Miles Sampa will react to this news. When Fitch recently issued their Zambia downgrade, Kabimba vehemently derided all ratings agencies claiming their assessments had no impact on our economy. So now that S&P have maintained a stable outlook, the same PF will be quick to claim it’s due to their great leadership. Funny but worth pointing out.
Kaponya Still Waiting; I agree with you entirely. It’ll be interesting to see how Wynter Kabimba and Miles Sampa will react to this news. When Fitch recently issued their Zambia downgrade, Kabimba vehemently derided all ratings agencies claiming their assessments had no impact on our economy. So now that S&P have maintained a stable outlook, the same PF will be quick to claim it’s due to their great leadership. Funny but worth pointing out.
tired of these ratings,we need food,jobs,good heath facilities,education for all.this is wat should worry every one.the cobra needs to start workn.all u prophets of doom,its time to work hard.take heed
Breaking news former vice president in MMD governement George Kunda is dead . Mr Kunda died this morning at UTH where he was admitted 3 days ago.
No matter the rivalry !!!! Death is never cherished… … RIP GK … so ba chimbwi keep yr miserable utterences up a*&# holes
You shall never deride and cherish in the death of other people. Unless you are not human behave yourself. George I wish a get well soon. We still need you alive in Zambian politics. We shall continue praying for you.
No ba kaponya, you cannot trumpet the same rating which you condemned under MMD. So far in the 2×90 days that PF has been in power, it has not done anything on the economy of its own. PF is just following what they found already engineered by RB, Musokotwane, Mutati, Caleb Fundanga and the rest of the A-team. Rebasing the kwacha, BoZ interest policy rate, etc all these are policies which were authored by the A-team.
Zambians be good bloggers .you are celebrating that Kunda is dead.first it was Sata nomba ni Kunda .No wonder we cant invent anything after so many years of getting degrees. A kenyan boy recently won a prize for a software for mobile phones while ifwe just blogging rubbish. shame
3# MAXELL is a blind F00l, Chisusi, and Lithole sana. This 3#MAXELL has forgotten the comments he posted when Zambia was given a B+ Rating. He called RB and MMD all sorts names and said the B+ Rating was fake and MMD did not deserve the credit. The lasted rating is from the works that MMD implanted. PF has not done anything to steer the economy. We can only judge them six months from now. Tell us what note has PF and his buffoons taken. So bwana MAXELL, suck up your own vomit. Why don’t you search the past comments you posted on LT on this subject. You cannot have it both sides and now take the credit.
PF bloggers are sad Crocodiles and Chameleons that needs to be painted with Oil Paint to stop them from ever changing colours again. That’s the problem with posting & telling lies because you always forget what you said yesterday. These chaps are forgetting what they posted just a few months ago. I am waiting what the Chief Fool ( Wynter Kabimba) has to say when he strongly castigated and rebuked the B+ Rating when MMD was in power. Imwe Ba Mambala. Ubufi, Bonza, its too much.
The policies that were started in 1991 are bearing fruit now. We have had questionable people in power but overall the policies are the ones bent on supporting growth of the Zambian Economy though it had to shrink at one point during a transission period of change. The HIPIC program and wage freez was started under Chiluba but it reached Maturity in Mwanawasas Govt. Though he tried to personalise it as his own policy people must remember the wage freez which we had to endure from the Chiluba Days. After that our debts were canccelled and this led to the growth of our economy as money meant forf servicing of debts could now be spent on our country. This is the primary reason why we have been experiencing gowth in our economy. Our sacrifice is reponssible for the growth Zambia is experiencin
i hope this positive rating will begin to make our friends in and on PF accept fitch rating. want to hear what chaps like Given and Wynter say. in any case this is great news and i hope as the PF gain experience in running gov they will build on this
In short, PF is all smoke and mirrors; they have no alternatives but to follow in the footsteps of MMD. Hence, the strength of the middle-of-theroad voice of Chikwanda versus the PF radical kaponyas like Sichinga. This economic game was won a long time ago when socialism collapsed. Socialism is dead; long live capitalism. No higher (windfall taxes), no nationalisation, no exchange controls, no export controls, no unwieldy parastatals.
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