S&P upholds Zambia’s rating

The Standard & Poor’s (S&P) has affirmed Zambia’s B-Plus rating but is concerned that the country’s external debt profile could weaken.
The projected weakening of the external debt profile is, according to S&P, “owing to rising capital goods imports and higher profit repatriation”.
When presenting the 2014 national budget a fortnight ago, Finance Minister Alexander Chikwanda announced a 33 percent increase in spending.
He said the budget deficit will grow to 8.5 percent this year against a background of significantly increased finances for construction of roads, hospitals and schools.
On Friday, however, the S&P left the sovereign credit rating at B-plus, four notches below investment grade status. This is despite revising down Zambia’s credit outlook to negative from stable.
“We consider that Zambia’s government has recently adopted an expansionary fiscal stance, which we think will substantially increase the government debt burden in 2013-2016, despite strong nominal GDP growth,” S&P said in a statement.
S&P pointed toward rising civil servant salaries starting in 2013 and an expectation that the government plans to increase social welfare spending and capital expenditures for the anticipated fiscal drop.
Zambia is rated B1 with a stable outlook by Moody’s Investors Service and B-plus with a negative outlook by Fitch Ratings.