International Ratings agency Standard & Poor says Zambia’s political landscape has deteriorated broadly.
In it latest rating for Zambia, Standard & Poor said some policy measures, largely non-anticipated, have increased uncertainties regarding the future economic policy framework.
It however maintained its B+/B rating for Zambia but warned that it could lower the ratings if the administration’s policies weaken the country’s external, fiscal, or monetary fundamentals, or impair copper production
The agency said that the political landscape has broadly deteriorated due to government’s clamp down on the opposition, including attempts to block public rallies and repeated arrests of the main opposition parties’ leaders.
The agency said it believes that some policy measures, largely non-anticipated, have increased uncertainties regarding the future economic policy framework.
It said these measures include the mandatory use of the kwacha in domestic transactions and for listing the prices of goods and services, the introduction of an interest rate cap on lending by commercial banks, increased capital requirements for banks and most importantly a recent amendment of the Bank Of Zambia Act that it think may open the way for potential foreign exchange controls.
It however says most policy measures have so far not dampened growth prospects, and are unlikely to become more radical given Zambia’s reliance on foreign investors for growth.
It forecast GDP growth per capita to remain above 4% in 2013-2016, supported by increased copper and agricultural output, strong foreign investment in the mining sector, and dynamic public sector investment in infrastructure, health, and education.
Standard and Poor’s expects inflation to remain in single digits, where it has been since 2010, on increased food production and contained exchange-rate volatility.
It said over 2013-2016, the rise in tax revenues from the mining sector, resulting from higher production and tax reforms, will likely mitigate the expected decrease in donor grants as well as a rise in public-sector wages.