Zambia says Moody's downgrade won't affect Eurobond payments

The Zambian government on Friday said the revision of the country's rating by Moody's Investors Service will not have an effect on the country's interest payments of the Eurobonds.

The international rating agency has downgraded Zambia's long-term issuer rating from B2 to B3 and changed the outlook to negative from stable.

The downgrade on the issuer rating was driven by greater-than-anticipated fiscal slippages in 2016, leading to material liquidity pressures and significant challenges to finance the budget deficit.

Analysts have said this makes lending money to Zambia risky as the southern African nation has no capacity to repay.

While acknowledging that the assessment had implications for the country as it may require paying a higher premium on new borrowings from the international debt market, Deputy Minister of Finance Christopher Mvunga said the revision does not have an effect on the interest payments that the country was paying on three Eurobonds it acquired.

The Zambian minister told state broadcaster, the Zambia National Broadcasting Corporation that the country has tightened yield on the current Eurobonds from an average of 14.5 percent in February this year to around 12 percent currently.

According to him, the revision of the outlook did not necessarily mean the country would have to pay a higher premium in the international market but noted that it would be imprudent for the government to continue borrowing externally at unsustainable levels in such a scenario.

Zambia issued its debut Eurobond of 750 million U.S. dollars in 2012 at a yield of 5.625 percent and this was followed by another 1 billion dollars bonds at a yield of 8.5 percent in 2014. The third bond of 1.25 billion dollars was issued in 2015. Endit