Standard & Poor’s has cut its credit rating outlook for Zambia to negative from stable.
The agency has however left the sovereign credit rating at B-plus saying there was a more than one-in-three chance it could downgrade if the country’s financial situation deteriorated.
It said the change in the outlook signifies a one-in-three chance that Zambia could see its credit rating downgraded within a year.
The agency pointed toward rising civil servant salaries starting in 2013 and an expectation the government plans to increase social welfare spending and capital expenditures for the anticipated fiscal deterioration.
Standard & Poor’s analyst Marie-France Raynaud said in a statement Friday that the firm believes that the PF government is adopting this expansionary fiscal stance just as it faces decreasing support, given the economy’s failure to generate sufficient job opportunities.
Finance Minister Alexander Chikwanda announced a 33 percent increase in spending for 2014, saying the budget deficit will grow to 8.5 percent this year, nearly double what had been planned.
Standard & Poor’s said Government debt will reach about 35% of gross domestic product by 2016 compared to 19 percent last year, even if Zambia meets its revenue targets.
The ratings agency said the budget deficit will be 7.6 percent next year, higher than the 6.6 percent Mr Chikwanda is planning for.
Zambia is rated B1 with a stable outlook by Moody’s Investors Service and B-plus with a negative outlook by Fitch Ratings
Thats what pay raises,endless by elections & little knowledge will do to ya credit rating.MCS probably thinks credit crunch is a breakfast cereal too.
Elolwanya nomba! Folks we are getting into deep sh1t with Chikwanda and Sata in control. These people don’t care about the future of our grand children because their children ‘s future is being sorted out right now.
Borrowing left ,right and centre has seriously damaged Zambia ‘s reputation on the international financial markets. Zambia will now be required to borrow on kaloba terms if it is already doing so. And the amount of money which Zambia will be allowed to borrow will also be reduced drastically.
What saddens me the most is that only 35% of borrowed money in ploughed into developmental projects while the rest finds its way into Sata and his cohorts ‘ pockets.Its a pity that after five years its only the poverty stricken people who will be worse off. 2016 change is…
Oh dear! Chikwanda is at it again! This man will never learn. Indeed its TRUE that old habits die hard. The man and his nephew are economic illiterates. They have expanded the bureaucracy and embarked on prestige projects like the two universities in their home province without thinking where the capital and recurrent expenditure will come from. They have dipped into the country’s reserves and gone into a borrowing binge. We are told that they are building 650 health centres , schools, universities some of them expected to open next year. One wonders how they are going to operate as there is a recruitment freeze for two years! Do these people know what they are doing!
@sepo
I agree with you 100%. All these projects they are building will only end up being white elephants due to lack of money to run them. Chikwanda himself in his budget stipulated that there will be a wage and employment freeze starting next year. This begs the questions: will these institutions be opened? where will the money to run them come from given the fact that right now the PF is failing to fund the existing institutions adequately?
These guys are proving to be “chimbwis no plan” for sure.
Anyway lets brace ourselves for taxes and tax increases until 2016.
2016 please come fast before Zambia ‘s credibility is completely decimated!
Whats all this Crap?? So you want our CS to be getting peanuts??
Your Majesty go to school!
Your Majesty! School is very important. Go to school to understand some of these things. We don’t hate you, but your illiteracy.
Like I told one journalist from via, at the rate we are going by 2016 all credit lending institutions will be skeptical to invest in Zambia. We have actually not yet seen anything. Zambia’s economy is likely to freeze due to increased local borrowing for consumption.
Meant VOA
It should be understood that credit agencies are just like some rating/firms that we may have around except that these us nationally accredited firms have earned themselves a huge reputation from investors that buy in their reports and subscribe to their services for the ratings,serving them time to analyze on their own. Ratings are a measure of the quality of performance of an asset or liability , a downgrades sends messages to would be and current investors to down weight or over weight their positions.
Usually a down grade in one rating spills over to many moody Aa1 Aa2 Aa3 S&P AAA AA+ AA AA Fitch AAA AA+ AA AA for high low and speculative or Junk as it its important to understand the implications
Finally we have started seeing the benefits of spending aimlessly. Stop the by-elections and reduce the big and unproductive government. Fire all deputy ministers and focus on stabilizing the economy and development (I mean development for the whole country and not only Muchinga)
Now it should be understood that the rating agencies in the investments environments of our colleagues across are research institutions.it doesnot mean therefore that their option is what will shape our efforts but it sends a lot of message to huge and potential investors to watch the unfolding in Zambia and therefore raising concerns about future prospects and defaults resulting in huge spreads in interest rates. Establishing and develop our own ratings agencies because most of the rating agencies are a feed into huge potential investors and offer a service to such shifting positions often to those who subscribe on their ratings though the standards require them to show basis and facts behind the down…
…And I would bet my last kwacha that the President, 70 percent of his cabinet and 95 percent of his deputy ministers can make neither head nor tail of an “economic outlook”.To them it economics is simply “more money in our pockets” by whatever short term means- this govt cannot even reconcile why we are increasing our deficit when the said subsidy removal would negate the deficit to some degree. Ni Kabova govt zoona.
Articles like this makes few comments. it worries me coz its a sign bloggers have no or little knowledge of important things save for winter kabimba,s story. Coming to the topic, its important to realize that this is just ratings which can be taken serious by investors or they will do other risk assessment while investing in the country. The comforting thing is that our B rating still stands and iam sure come 2015, will be ona better side
i like your optimism for 2015. However, on the ground things are looking the opposite way. And it is easy to see the pointers (we don’t need external agencies to tell us of the coming problems). I mean managing the country is like managing any other business. Money comes in from production and money goes on expenditure. From where i m sitting PF has increased expenditure on elections, public salaries, huge cabinet, infrastructure, new districts, unnecessary shuffling around of senior civil servants and diplomats, building ‘universities’ etc. But there is no corresponding increase in the national purse collections. This will lead to a big budget deficit, bigger external debt(to b paid by future generations wen PF is long gone)
@ Mbuya offcourse we always say things being equal. iam praying this infrastructure development which has taken money pays dividends. how???. imagine the cluster ecomonies being implemented by CEEC benefiting from good road networks. this will in turn make all the rural areas conducive for business with the incentives chikwanda has put up. THIS WILL ONLY WORK IF all these money are put to good use as we have seen during my tour of Zambia.
I was just going through exactly my likely. No no how. Out of the league.
Truly, wondering how much could spent within 18 months. Finished the reserves and started borrowing heavily. how do we pay back????
Unfortunately no one in PF understands Credit ratings and even the old git Chikanda who did his Economics certificate 60 years ago has no clue about its implications on the economy.
Understand the Universe of ratings and assignments by each report service firm B the trajectory is that you either move to the right or left but often to right looking at the biasness and thinking of the raters.its like your have the comfirmation bias and simply comfirm your reasoning and analysis.Its up to the policy makers to look at the rate transition and align accordingly not to stifle and come and default
A negative credit rating implies our economy is getting off course. The development agenda is over crowded and the deficit is growing. Pf should learn not try to please everybody. With such an ambitious infrastructure development program, consumption should have been restricted.
PF you fond this economy with good credit ratings and good forex reserves. All you are doing is sharing contracts and putting up structures in your home towns at the expense of managing the economy. It is sad that most Zambians do not understand the need for their govt to have a sound economic policy which drives the national development agenda. Not what is happening where one day you ask for a tax only to suspend it the following day. That is trail and error approach which does not build confidence in the economy.
this analyst marie-france raynaud seems to base her analysis on some resarch paper which is detached from events on the ground.yes the govt has adopted an expansionary stance in terms of expenditure and for good reasons. if only it stays the course of putting the monies in infrastructure development.to say there is a failure by the economy to generate sufficient job opportunities can not be further from the truth.
yuo cant in one breethe arm twist a govt into implementing a recruitment freeze and in the very next say the economy aint creating sufficient jobs.besides these same ratings when done on european countries are rubbished as mere academic postuering.case in point FRANCE in 2012.
The problem is not you and me or the gov but they provide the rating service to their clients.
Remember its only an indication or commonly an outlook not the real but then if to a person who has never seen Zambia or been,he will make use of that rating service to invest or disinvest from Zambia in his portfolios as it where.
Its really up to us to offer the real direction and bit the ratings. Often times ratings ages are the opposite side of the same team to major investors like a research department of an investments bank and can tilt the ratings to suit their requirements not necessary shared by the borrower.But its important to refine since you have locked in their positions
The problem is not you and me or the gov but they provide the rating service to their clients.
Remember its only an indication or commonly an outlook not the real but then if to a person who has never seen Zambia or been,he will make use of that rating service to invest or disinvest from Zambia in his portfolios as it where.
Its really up to us to offer the real direction and bit the ratings. Often times ratings ages are the opposite side of the same team to major investors like a research department of an investments bank and can tilt the ratings to suit their requirements not necessary shared by the borrower.But its important to refine since you have locked in their positions.
Above all be on top of things and avoid being schemed as a country by investors because of our weak fiscal position.Understanding the behavior of the other team position you to fall in their trap-A Ponzi Scheme
China will soon buy Zambia and add it to its list of colonies!
Keep borrowing recklessly for consumption and you will soon lose your Sovereignty!
Zambia in PF hands is like a good-looking bicycle but without breaks!
The rich ruleth over the poor, and the borrower is servant to the lender. (Proverbs 22:7 KJV)
Borrowing is good if you know what you are doing!
In the very near future only PONZI schemes will b able to lend money to Zambia.
China has already bought USA usa cannot manage to pay what it owes china just imagine even the usa all nations in debts world wide
Lets concentrate and build steadly the gains we have recorded so far and reengineer the Revenue side to avoid being kicked like a can down the road by investors As the tough goes on which such is the economy you find that gov continue to borrow in a rollover style to finance maturing principal and interest with increased detoliation in quality of yields and rating and then the investors crowd out making it difficult to raise addition and then the default.lets restructure our positions and ensure we swim back to the firm group and trust our own confidence in reserves and avoiding the dangerous Ponzi point of Sovereign Debt and avoid being kicked like a can
With your awful english skills it makes me doubt very much your financial literacy and your grasp of complex economic dynamics.You’re definitely NOT financial analyst material.
Iwe naiwe Enka. A Financial analyst doenst have to be fantastic in grammar. We can follow him. A journalist or lawyer; yes
Chikwanda please, resign, stop playing monkey tricks with the future of Zambians.
Sad outlook indeed, government needs to work to restore investors confidence. At this rate we are headed for a disaster.
I need not comment or challenge anyone this is a social media and when we type we simply type but if you went on somewebsite you will find my name exactly the way it is appearing hear.Here its just a service and its free consultancy otherwise people pay for such.
Now back to the Outlook
“lets Cure the propensity, acknowledge and accept the costs of past profligacy, reducing or eliminating deficits and possibly also haircutting creditors as we have a revenue driven budget”
We respect the rights and priveledges of Lusaka Times and avoid any form of advertisement or solitation or prove to my friend.I like and follow the minds here and value their comments and see them as positive development towards the topic
Its a social media. What we write we have read seen and studied and times taught and meant to observe in case studies.What we are talking about hear is what Japan and USA have passed through and we should not go through the same costs for which there is free reference.
My comments are very positive and not political at all.I have said previsously I am not a politician but a product of the Gold standard in membership and working towards the charter
Just the name “Standard & Poor’s” sends my mind into a state of critical awareness towards their motives. Not that I have a problem with their ratings, I just don’t like their way of “shouting it from the rooftops” which in itself has a manipulative effect. In this case it does not help but only scare away potential creditors and dishearten those that are working hard towards economic development.
IS CHINA RATED BY THESE GUYS?
Haha,you got rid of educated RB and Musokotwane who were deftly managing the economy .Now our rating is down and so are the record forex reserves due to mismanagement by PF illeducated kolwestans.
Nine just pray your Chikwanda gets the message, disregarding the rating does us no good, instead of job creation and growing the economy, now we are spending just for show, while accumulating large debt, not forgetting that large cabinet , only God knows how we are making it .pretty soon we will be on survival mode.
China runs what you call a renminbi type of financial market system a red capitalism type making it effectively difficult to report on and do this sort of thing.Its a difficult task
Zambia Country Risk:Next time you have been given a risk downgrade make sure you ask for a researched report or buy one or simply run your own facts and compare .
You can also study the structure of the sovereign risk itself and other classifications and see the reasons for that Classification and ask for the report to convince yourself.Often the bias is one asset class and usually used as an indicator with a client in mind.
Reasonable basis must be shown always and such a report must be thourough
Sovereign risk B
Currency risk BB
Bankingsector risk BB
Political risk BB
Economic structure risk B
Next Time you are given a rating ask for the report study the reasonable basis for the report and sometimes try to work out and research your own and see.Often the ratings are a service to the investor and the requirement is that files and figures are provided to support the basis when asked.You can also take an interest to read and follow.Its not also hepful to simply ignore for those but read and fine tune to requested.But its not like its cast in stone.Its an outlook.I like following the rating ages and value their importance in Investments especially moody investor service.
What is our own rat?
Risk Sovereign risk B
Currency risk BB,
Banking sector risk BB
Political risk BB
Economic…
Not a surprise. It’s another northerner at the helm of power. The country is fast approaching the conditions that prevailed during the days of Kenneth Kaunda and Frederick Chiluba.