Zambia dismisses Moody's economic assessment

Zambia has dismissed an assessment by international rating agency, Moody's Investors Service, which downgraded the country's rating, its Ministry of Finance said in a Monday statement.

Last Friday, the international rating agency downgraded Zambia's issuer rating to B2 from B1 while the outlook on the rating agency downgraded Zambia issuer rating to B2 from B1 while the outlook on the rating was changed to stable from negative.

According to a statement released by the rating agency, the key driver for the downgrade was its expectation of a sustained deterioration in fiscal and debt metrics that were unlikely to reverse over the course of the 3-5 year rating horizon given the challenges stemming from a lower growth environment amid an extended period of weak commodity prices, constrained copper production, and domestic electricity shortages constraining business activities.

"The key driver for the downgrade is our expectation that the trend of persistent fiscal deficits and deterioration in debt metrics witnessed over the past few years is likely to continue, warranting repositioning Zambia's rating at the B2 level to reflect higher credit risk," the agency said in the statement.

But Ministry of Finance Public Relations Officer Chileshe Kandeta said in the statement that the rating by Moody's was unsolicited and against best practices as Zambia did not subscribe to the service.

The official said the assessment should be ignored because its correctness was not discussed with any authorized representative of the government.

The government, he said, only engages with two rating agencies, namely Fitch Group and Standard & Poor's on policy matters, data provision and reconciliation.

According to him, the rating agency had in the past made frantic efforts for a formal arrangement with the government, this has not materialized, adding that only the two rating agencies were deemed sufficiently competent to provide the required independent rating services.

"We appeal to Moody's to restrain themselves from imposing assessments on Zambia because the act is inconsistent with international best practices governed by contractual obligations between the credit rated entity and the rating agency," he added. Endit