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Moody’s downgrades Zambia credit rating to negative


Moody’s Investors Service (“Moody’s”) has yesterday downgraded the Government of Zambia’s long-term issuer ratings to Caa2 from Caa1 and changed the outlook to negative from stable.
The downgrade reflects increasing external and liquidity pressures, which, by impairing the government’s ability to service its debt over the medium term, raise the probability of default over the near term, including a distressed debt exchange, beyond what is captured in a Caa1 rating. The rising probability of default also reflects increasingly stark credit challenges stemming from rising debt levels, which further reduce the likelihood that the external and liquidity stress will be resolved rapidly.
The Caa2 rating balances those pressures against the possibility that Zambia could refinance the forthcoming maturities and continue to service its debt while preventing a depletion of foreign exchange reserves.
The negative outlook reflects the risk of material losses to investors in the event of a default by Zambia, beyond what would be consistent with a Caa2 rating.
Concurrently, Moody’s has lowered Zambia’s long-term foreign-currency bond ceiling to B3 from B2, its long-term foreign-currency deposit ceiling to Caa3 from Caa2, and its long-term local-currency bond and deposit ceilings to B2 from B1.

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News Source: Mwebantu

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