Ratings agency Moody’s announced yesterday that it had completed a periodic review of Zambia’s ratings. According to Moody’s, Zambia’s Ca rating is constrained by the country’s “b2” economic strength, reflecting is small size, low per capita income and persistent economic challenges. Meanwhile, the “caa1” institutions and governance strength takes into account a weak governance profile, low fiscal policy effectiveness, and limited predictability of policymaking. The “ca” fiscal strength reflects unsustainable debt dynamics that have increased the likelihood of a sovereign debt restructuring resulting in large losses to private-sector creditors, as well as weak debt affordability metrics due to increased cost of debt and reliance on commercial debt. Finally, its “ca” susceptibility to even risk is driven by heightened liquidity and external pressures, which the pandemic has intensified, limiting its capacity to service debt and leading to the default on its Eurobond.
The rise of global COVID-19 infections and the subsequent lockdowns in the likes of London has prompted longs in base metals to trim expo-sure. Fears of another round of economic hardship and fall out is driving the narrative this morning. The 3m LME benchmark was quoted some 0.3% lower at $7727.50/tonne at 04.25 local time.