Moody's Investors Service (Moody's) has today downgraded Zambia's long-term issuer rating to B3 from B2 and changed the outlook to negative from stable.
The downgrade on the issuer rating was driven by:
- Greater-than-anticipated fiscal slippages in 2016 leading to material liquidity pressures and significant challenges to finance the budget deficit;
- The prospects of further deterioration in Zambia's debt matrix in a lower growth environment, with the government debt likely to exceed 60% of GDP by 2018
The negative outlook reflects the view that risks are skewed toward even greater fiscal slippages and slower fiscal consolidation, which creates uncertainty over the magnitude of the funding challenges and deterioration of Zambia's debt profile over the rating horizon.
Concurrently, Moody's has lowered Zambia's long-term foreign-currency bond ceiling to B1 from Ba3, its long-term foreign-currency deposit ceiling to Caa1 from B3, and its long-term local-currency bond and deposit ceilings to Ba2 from Ba1.
