Fitch downgrades Zambia’s credit risk rating to Restricted Default
International ratings agency, Fitch Ratings has downgraded Zambia’s long- and short-term foreign-currency issuer default ratings to Restricted Default (RD), following the expiry of a 30-day grace period for the coupon payment on the country’s USD1-billion Eurobond maturing in 2024. Fitch expects that Zambia will default on its remaining Eurobond commitments in due course, “either as the sovereign misses debt service payments or as an agreement is reached on restructuring the bonds”, states the rating agency. Two more Eurobond coupon payments are due on 30 January and 20 March 2021, besides the missed coupon payment on 14 October 2020. The Zambian Ministry of Finance issued a warning on 13 October stating that the government was facing “considerable challenges and liquidity difficulties compounded by COVID-19” that forced the authorities to issue a “consent solicitation” to bondholders and to seek debt-service suspension through the G20’s Debt Service Suspension Initiative (DSSI). Bondholders rejected the offer made by the Zambian authorities. The focus will now be placed on servicing foreign-currency-denominated debt from multilateral agencies and debt on a few priority projects with immediate social and economic impacts, the Zambian Ministry of Finance reported.
Source: IHS Markit