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S&P Maintains Zambia’s Stable Outlook Rating

STANDARD AND POORS on Friday, February, 23, 2018, AFFIRMED ZAMBIA’S RATING AT B WITH A STABLE OUTLOOK. This is a very important assessment of our economy.

The rating outcome is also a confirmation that Zambia’s Economic Stabilisation and Growth Programme [ESGP] is firmly grounded and is producing positive results as recently confirmed by other independent agencies such as MOODY’S INVESTOR SERVICE and FITCH RATINGS.

The rating outcome by STANDARD AND POORS demonstrates the international community’s recognition of Government’s strong commitment to the implementation of the economic stabilisation and growth reforms, which are targeted at continued macroeconomic stability, fiscal consolidation, and a corresponding accommodative monetary policy stance.

The affirmed rating is also a good signal and an assurance to domestic and external investors – crucial stakeholders in our quest to achieve higher economic growth rates – that we are committed to setting the right conditions for them to realise value from the Zambian economy.

As Government, we undertake to sustain this positive performance and will address the outstanding structural, quantitative, and policy reforms that are needed for the country to remain on the right track and consolidate the current gains in our economic stabilisation and growth journey.

To demonstrate the positive impact of our reform actions, the first bond auction on Government securities for 2018 was last week oversubscribed.

The nation may wish to know that the Government towards the end of last week went in the domestic market to raise K1.65 billion but, gladly, both domestic and foreign bond investors placed bids totaling K3.35 billion – leading to an over subscription of one-hundred-and-three percent.

More importantly and in line with Government’s resolve not to crowd out the private sector in Zambia, I am glad that the auction recorded substantial participation by foreign investors. This development underscores the confidence that the international community has with regard to our economy’s firm fundamentals and generally the positive prospects for business and growth.

The weighted yield rate at 18.63 percent, remained largely changed from the last Bond auction in 2017, signaling the high competition by investors.

With this positive performance, I wish to reassure citizens that the Government will move to address concerns around the rating of high risk of debt distress by implementing a number of institutional and legal reforms. These reforms will assure continued debt and fiscal sustainability going forward.

Further, the Ministry of Finance, working with the Bank of Zambia, will focus on addressing high lending rates as they are a binding constraint to economic growth. In response to this policy initiative, the Bank of Zambia at its last monetary policy committee meeting reduced the policy rate to 9.75% from 10.25% and the reserve ratio to 5% from 8%.

These actions action will begin to provide to the banking system the much-needed liquidity for lending to the economy that will in turn address high lending rates.

The results of the latest assessment conducted by STANDARD AND POORS is a welcome assurance to investors to remain steadfastly confident that Zambia is on track with economic stabilisation and growth.

As Government under the leadership of President Edgar Chagwa Lungu, we will work diligently to ensure that the confidence of our people and that of investors in our good intentions to stabilise and grow the economy, are not taken for granted. We will endeavour to remain focused, firm, and committed to the implementation of the reform and transformational agenda so that the gains in economic stabilisation are protected through enhanced fiscal consolidation and sustained inclusive growth; without leaving anyone behind.

Margaret Mwanakatwe, MP
MINISTER OF FINANCE
Ministry of Finance
Chimanga Road
LUSAKA