By Nawa Mutumweno – Fitch has revised Zambia’s outlook from stable to positive and affirmed the country’s ceiling at B+. The revision of the outlook is in recognition of the progressive strides which the Government has made since October 2013 when the rating and outlook was downgraded, according to the Ministry of Finance public relations officer, Chileshe Kandeta.
On determining the Sovereign Credit Rating, Fitch, one of the world’s top three rating agencies, noted Zambia’s significant progress in economic growth, prudent fiscal management, and stability in the policy environment. Other key considerations in arriving at the rating were:
- Government’s commitment to expenditure restraint which has resulted in containment (for the first six months of 2014), of the fiscal deficit at 2 percent of GDP against a target of 2.5 percent.
- Improved fiscal outlook and strong GDP growth which has significantly contributed to containment of the debt burden. Fitch expects the consolidated general Government debt to peak at 33 percent of GDP in 2016,a level that is still below that of most peers; and
- Avoidance of adverse policy shifts and improvement of the policy, business and credit environment.
In a statement made available to the Treasury, Fitch recognised that the recent rebasing of the GDP has led to the revision of Zambia’s already robust average growth rate over the past five years to 7.3 percent from 6.8 percent, well above the ‘B’ median of 4.3 percent.
‘’Growth is forecast to remain at a robust 6 – 7 percent between 2014 and 2016; benefiting from the Government’s ambitious infrastructure investment programme, rising copper production and continued foreign direct investment (FDI). Repatriation of profits by foreign companies is more than offset by strong FDI inflows, assessed at 5 percent of GDP,’’ read the Fitch statement in part.
Commenting on the development, Secretary to the Treasury, FredsonYamba, welcomed the change in Zambia’s outlook from stable to positive and noted that the development was a testimony of the confidence that the international community has in the way the Zambian government is managing the economy.
‘’Our commitment is to improve further in the management of the economy until we attain an investment grade rating. The cornerstone of our economic policy will be built around prudential macroeconomic management, implementation of structural reforms, and facilitation of an economy where the private sector takes the lead in employment creation,’’ Mr. Yamba said.
He also affirmed that in line with the goals and objectives articulated in the Medium Term Expenditure Framework (MTEF) 2015 – 17, the target of Government will be to:
- Ensure that growth exceeds 7 percent per annum in an effort to support employment creation, and narrow the fiscal deficit to around 3 percent to unlock resources for private sector growth;
- Maintain macroeconomic stability to support growth and increase capacity in planning and project implementation by players in the economy; and
- Accelerate infrastructure development so as to continue diversification of the economy from reliance in copper, by creating an enabling environment for growth, particularly in the labour intensive sectors of agriculture, construction, and tourism.
‘’We look forward to engaging with international ratings agencies (Fitch and Standard & Poor’s), the private sector, investors and other stakeholders as we pursue the economic transformation of the country, and more importantly, improving the livelihood of our people,’’ assured Mr. Yamba.