Fitch, one of the world’s top three rating agencies, has revised Zambia’s economic 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 were downgraded. In determining the Sovereign Credit Rating, Fitch 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 included 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. Others were improved fiscal outlook and strong GDP growth which is said to have significantly contributed to containment of the debt burden and 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 here to the Treasury at the Ministry of Finance, Fitch recognized 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% 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 off-set by strong FDI inflows, assessed at 5% of GDP,” Fitch said in a statement.
Commenting on the development, Secretary to the Treasury Fredson Yamba, 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.