Lusaka ~ Thur, 24 Sept 2020
By ZR Reporter
Fitch Ratings has downgraded Zambia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘CC’, following the government’s consent solicitation issued on suspending debt service payments on its three outstanding global bonds.
However, the Zambian government has maintained that there is no cause for worry regarding its consent solicitation to suspend debt service payments for six months as that is in the interest of accountability and transparency, and does not, in any way, mean debt default.
Fitch has also downgraded the ratings on Zambia’s senior unsecured foreign-currency bonds included in the “consent solicitation” to ‘C’ from ‘CC’. This includes all of the foreign-currency bonds rated by Fitch because, in its view, a sovereign default will follow the “consent solicitation”.
According to Fitch, a suspension in payments, if agreed to by bondholders, would constitute a distressed debt exchange (DDE), but the government has assured that it will continue to make debt service payments on outstanding Eurobonds if an agreement is not reached.
Finance permanent secretary Mr Mukuli Chikuba has explained that Zambia has maintained contact with all commercial creditors in a bid to reach consensus on how to address the debt as an ongoing process.
“We are just trying to be transparent. It is not a default. In fact, two days ago, we had interest payments due on the $750 million eurobond and we paid,” Chikuba has said, an explanation that shows the government’s unwavered commitment to its debt payments.