Related Stories By Dermott Musalilwa Published: 20120410
S&P maintains Zambia rating


Lusaka - Rating agency, Standard and Poor (S&P), has maintained the B+ rating for Zambia’s sovereign credit.

The agency, which was recently in Zambia to evaluate the country’s performance, stated that Zambia’s economic forecast for 2012 is stable and looks primed for growth.

In a statement posted on the S&P website on March 30, the agency said Zambia remained constrained by fairly low-income levels (US$1 500 GDP per capita), balance-of-payments vulnerability due to volatile copper prices and “political risks”.

“The dismissal of the central bank governor (Caleb Fundanga) in September (2011), when he had just six months left in his second term, and the recent ongoing debate about the status of the registration of the (former ruling) Movement for Multiparty Democracy have also contributed to our impression of increased political interference.”

The maintenance of the rating was supported by promising investments 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.

“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.”

S&P lauded the government’s promotion of good governance and transparency.

The agency forecast per capita GDP growth of just over five percent on the back of a buoyed maize harvest in 2011, high copper prices and strong investment in mining.

The rating agency further projected average annual inflation to decrease to about six percent this year from 8.7 percent in 2011.

“Despite high copper prices, we estimate that the current account surplus will slip below two percent of current account receipts because of large imports needs.

“The general government deficit is expected to widen to 4.2 percent of GDP compared to 3.5 percent in 2011.”