Zambia’s Looming Debt Crisis

Zambia’s Looming Debt Crisis

Zambia’s kwacha fell the most on record after Moody’s Investors Service cut the credit rating of Africa’s second-biggest copper producer, a move the government rejected and told investors to ignore…

Zambia’s economy faces “a perfect storm” of plunging prices for the copper it relies on for 70 percent of export earnings at the same time as its worst power shortage, Renak Gopaldas, a credit risk analyst at Rand Merchant Bank in Johannesburg, said by phone. Growth will slow to 3.4 percent in 2015, missing the government’s revised target of 5 percent, Barclays Plc said in a note last week. That would be the most sluggish pace since 2001.

The looming debt crisis will soon hit Zambia and other commodity exporters hard. As most of other African countries that have floated dollar-denominated bonds are heavily dependent on commodity export. Zambia is experiencing fiscal blues on account of the global commodity slump. This will probably get worse. And the double whammy of plummeting currencies and reduced commodity exports will increase the real cost of external debt (on top of fuelling domestic inflation).

Comments

comments