Credit rating drop choking – EAZ
By BUUMBA CHIMBULU
THE constant downgrading of the credit rating of emerging markets such as Zambia and South Africa is increasing the debt coupon payments for developing countries, says Economics Association of Zambia (EAZ).
Recently, an international credit rating, Moody, downgraded South Africa’s credit rating to junk status, piling more anguish on an economy already in recession and battered by Africa’s worst coronavirus outbreak.
Commenting on this, EAZ president Lubinda Haabazoka, said in an interview that such credit ratings were increasing the debts’ coupon payments for developing countries.
“Rating agencies have become malicious as they serve the interests of their foreign investors by constantly downgrading the credit rating of emerging markets thereby increasing the coupon payments for developing countries.
“Moody’s of recent hit the nail in South Africa’s coffin by declaring junk status at the time they are expected to issue more debt to cushion the negative impact caused by the 21 days lockdown,” he said.
Dr Haabazoka said African countries in general were given credit ratings and asked to borrow on the international bond markets and to also access commercial loans.
He said after getting commercial loans and bonds, African countries were sent to other lenders such as the International Monetary Fund to be on ‘life support’.
Dr Haabazoka said countries such as Germany benefited as their banks for example, Deutsche Bank received over US$30 million in Eurobond management fees in Zambia only.
Zambia and South Africa have debt in form of Eurobonds worth US$3 billion and US$18. 9 billion, respectively.
“It is a chain. There is a crisis, money is made available, their banks arrange bonds, rating agencies increase the cost of capital, we sell the mineral resources and revenue we receive is channelled to them through principal and coupon payments! That is if we get the revenue at all,” Dr Haabazoka said.
He also observed that an integrated approach towards economic development was lacking for emerging markets.
Dr Haabazoka called for the reformation of SADC and COMESA bodies to ensure full participation of all member states.
“There is also need to clarify the existence of both SADC and COMESA. Maybe it’s time they were collapsed into one institution??
“We need full integration from Egypt to South Africa with all countries playing equal roles under COMESA then from there we move into Africa,” he said.