Fitch upgrades Zambia to ‘B-’, assigns stable outlook on economy as debt restructuring nears completion

Fitch Ratings has upgraded Zambia’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘B-’ from ‘Restricted Default’ (RD), assigning a stable outlook.

The agency said the upgrade reflected its assessment that Zambia has normalised relations with a significant majority of its external commercial creditors.

The country restructured its US$3.8 billion Eurobonds in June 2024 and has since either restructured or reached agreement on restructuring terms for US$272 million of non-bond external commercial debt.

Fitch noted that about US$44 million in non-bond commercial debt — representing 1 percent of the total external commercial debt under the restructuring perimeter — remained under negotiation, but assessed holdout risks as small.

The agency excluded export credit agency–backed claims, supplier credits and loans from plurilateral lenders from its commercial debt definition.

On the broader restructuring process, Fitch said US$13.3 billion of commercial, bilateral and plurilateral external debt was included in the perimeter.

“As of November 2025, Zambia has either restructured or reached an agreement on restructuring terms for approximately 94 percent of this,” it stated.

Of the US$889 million still pending restructuring, US$300 million is supplier credits, US$455 million is debt owed to plurilateral lenders and US$44 million is the remaining commercial debt.

Fitch projects Zambia’s government debt will fall from 114 percent of GDP in 2024 to 93 percent in 2025 and to 85 percent in 2026, supported by strong nominal growth, continued primary surpluses and currency appreciation in 2025.

“We include central government arrears to external contractors, to independent power producers, to fuel providers and to domestic suppliers in our headline government debt,” it said.

The agency forecasts that Zambia’s debt will decline below its pre-default level by 2027, reaching 79 percent of GDP compared to 81.5 percent in 2019, though still higher than the median for ‘B’-rated countries at 51 percent.

It estimated the weighted average interest rate on external debt will fall below 1.5 percent in 2025–2027, down from 7.5 percent in 2019, reflecting the increased share of official bilateral and multilateral debt and the sizeable reduction in coupon and interest rates on treated debt.

It added that the duration of treated external debt had also been significantly extended.

“We forecast external debt service obligations will decline to 2.5% of GDP in 2025 and 2% in 2027, from 2.8% in 2024 and much below the 5.1% level of 2019, reflecting the lower interest payments and the duration extension,” Fitch said.

The agency added that there remained a substantial likelihood of the upside case treatment being triggered on the Eurobonds, potentially with implications for restructured official debt under possible undisclosed claw-back rules.

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