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Fitch downgrades Zambia's economic outlook
Last Updated: 2018-10-12 11:43 | Xinhua
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Rating agency Fitch on Thursday downgraded Zambia's long-term foreign currency Issuer Defaulting Rating (IDR) to 'B-' from 'B', with a negative outlook.

The downgrade and negative outlook on Zambia's long-term IDRs reflects the substantial upward revision in the government budget deficits targets, it said in a statement posted on its website.

It added that upward revisions to fiscal deficits and government debt have weakened the credibility of the government's fiscal targets.

"The deficit revisions have been the result of the reconciliation of previous disbursements to externally financed projects and of higher debt-servicing costs, both of which reflect broad deficiencies in public financial management and a rapid accumulation of new external debt," the statement said.

The Zambia government revised the 2018 fiscal deficit target to 7.4 percent of gross domestic product (GDP) from the 6.1 percent contained in the 2018 budget as well as revised its external debt to 9.37 billion U.S. dollars.

While acknowledging that the government has taken some steps to keep future disbursements in line with the budget, Fitch says this was likely to remain a problem over the medium term.

The rating agency has also projected Zambia's general government debt to reach 69 percent of GDP by end of 2018, up from 60 percent at end of 2017.

The further expected increase in foreign-currency debt will make Zambia's debt stock more vulnerable to foreign exchange volatility and to a rising global interest-rate environment, it added.

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