Zambias drive to acquire an international credit
rating will encourage the government and mining companies to
issue international bonds, the countrys central bank
governor has said.
The bond market is a quicker route to
financing than traditional sources, Bank of Zambia governor
Caleb Fundanga told Emerging Markets in an interview
in Abidjan on Thursday.
It is all systems go, and the economic conditions are
now in our favour, he added.
Fundanga said that JP Morgan would sign an agreement with
the government today to act as an advisor, and would
subsequently issue tenders for rating agencies.
The government suspended plans to get a credit rating in May
last year due to the global financial crisis.
Fundanga said the credit ratings primary purpose is to
pave the way for stable access to
international market financing for commodity-focused
corporates, as well as addressing the balance-of-payments needs
of the government.
The reason why any government wants a credit rating is
to raise money, he said. Governments should no
longer wait to get financing from traditional sources
such as aid donors, which sometimes takes years to
He said bond issuance provided quick access to
large amounts of money and so capital markets are the
best way of financing to getting money quickly.
Mining companies in Africas leading copper producer
needed a sovereign bond to provide a benchmark to help
corporates to price international bonds, Fundanga said.
Our mining sector is entirely dependent on international
financing. Getting, say, $750 million is only possible in
Zambias move is the latest example of African
governments dipping their toes into international markets,
buoyed by the regional economic upturn and faced with need to
mobilize external sources of financing to fund long-term
project such as infrastructure.
Angola last week received a B+ credit rating from Standard
& Poors and Fitch Ratings, and a B1 rating from
Moodys Investor Service. The credit ratings paved the way
for an international bond sale, the government said.
Asked whether Zambia should receive a similar rating,
Fundanga said: In comparative terms to our peers in the
region, we are in good shape. I would expect a good rating that
is comparable or even better.
On the outlook for copper prices, Fundanga said a growing US
economy would offset the impact of a moderate
slowdown in China and anaemic eurozone growth.
The Greek debt crisis caused copper prices to fall from
$6,415 a tonne, a 20% fall from mid April. But Fundango said
that $4,000 a tonne would still be the governments
break-even price for the national budget.