S&P Global Ratings downgraded Zambia's long-term sovereign credit rating to CCC from CCC+ and revised the outlook to negative from stable, citing "increasing risks" that the country would be unable to meet commercial obligations in 2020.
The ratings action comes after the country missed an interest installment of US$1.4 million to an official lender due to administrative delays, resulting in debt arrears. While the arrears have since been cleared, the missed payment highlights Zambia's weak macroeconomic and fiscal position, the rating agency said.
"Should economic and financial conditions weaken further, Zambia could face difficulties in meeting its financial commitments to commercial creditors," Ratings said. The agency expects Zambia's economic growth to come in at around 2% in 2019 and its fiscal deficit to exceed 7% of GDP.
S&P said it could downgrade Zambia over the next six to 12 months if it expects the country will fail to meet commercial obligations or if it were to enter into debt restructuring negotiations. The outlook could be revised back to stable if the country's external liquidity position improves over the next few months.
The rating agency also affirmed Zambia's short-term rating at C.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.