Two Upgrades in Eight Days: Can Zambia Turn Ratings Relief into Real Investment?

Derry Thornalley
2 days ago
6 min read

For the first time since it tumbled into default in 2020, Zambia is beginning a new month with something it has not seen in years: two major rating agencies moving in the right direction at the same time.

On 21 November 2025, S&P Global Ratings lifted Zambia’s foreign-currency sovereign rating from selective default (SD) to CCC+/C with a stable outlook, explicitly acknowledging that the country had “exited default status” after making substantial progress in restructuring its external debt.

Just a week later, on 28 November, Fitch Ratings went further, upgrading the sovereign from Restricted Default (RD) to B- with a stable outlook – Zambia’s highest foreign-currency rating in more than five years. Fitch said relations with “a significant majority” of commercial creditors had normalised and projected government debt would fall from around 114% of GDP in 2024 to 93% in 2025 and 85% in 2026, assuming reforms stay on track.

For Finance Minister Situmbeko Musokotwane, the message is simple: Zambia is now “a credible and investable economy again,” and the days of being automatically screened out of portfolios on a technical default label are over.

The reality, as always, is more complicated.

From first African defaulter to restructuring test case

Zambia’s recovery story begins with a fall from grace. In November 2020, it became the first African nation to default on its Eurobond payments during the COVID-19 era, after years of rapid borrowing and weak oversight.

A three-year slog followed:

By March 2024, Lusaka had finally agreed terms on about US$3 billion of Eurobonds, a key piece of a wider restructuring that also covered official bilateral creditors under the G20 Common Framework.
An IMF-backed programme – a 38-month Extended Credit Facility (ECF) approved in 2022 and subsequently augmented – provided around US$1.7 billion in financing, tied to fiscal tightening, governance reforms and debt-restructuring milestones.
In July 2025, the IMF Executive Board completed the fifth review, unlocking about US$184 million and projecting GDP growth of 5.8% in 2025 and 6.4% in 2026 as Zambia emerges from a severe drought.

With the main official and bondholder groups now covered by agreements, the fund has extended the ECF by three months to January 2026 to complete a sixth review, and Lusaka has signalled it will seek a further 12-month extension to lock in reforms.

S&P’s move to CCC+ essentially formalised what investors already sensed: Zambia is no longer in default, even if it remains in a high-risk category. Fitch’s jump to B- went a step further, putting Zambia back into the same broad ratings cluster as several other African frontier issuers.

What the upgrades actually change

In practice, these ratings actions matter in three ways.

1. They change the screening rules. Many global funds are barred by mandate from holding instruments rated in default or selective default. Moving to CCC+ and B- re-opens the door for such investors to re-enter Zambia’s Eurobonds and, over time, its local-currency debt, provided the yields are attractive enough to compensate for the risk.

2. They validate the debt arithmetic. Both S&P and Fitch cite the combined impact of restructuring and fiscal adjustment: lower external coupons, lengthened maturities and a commitment to primary surpluses that should gradually pull the debt-to-GDP ratio down through the 90s and into the 80s over the next two years.

The IMF’s latest country data tell a similar story: projected real GDP growth of 5.8% in 2025, consumer price inflation around 14%, and a narrowing overall deficit as fuel and food subsidies are reshaped.

3. They lower borrowing costs – eventually. Upgrades don’t automatically cut yields, but they give investors a framework for re-pricing risk. Analysts expect Zambia’s Eurobonds, which have already rallied on restructuring news, to compress further if the IMF signs off on the sixth review and remaining creditor disputes are tidied up. That, in turn, should help reduce the premium the state pays when it next taps either international or domestic markets.

A recovery still exposed to droughts, copper and unresolved creditors

For all the optimism, neither the fund nor the agencies are declaring victory.

Zambia is still at high risk of debt distress, and success hinges on sticking to spending limits and revenue measures agreed with the IMF – not easy in a political environment still scarred by austerity.
The kwacha remains fragile, having hit record lows earlier in 2025 as a once-in-a-century drought hammered hydropower output and disrupted copper production, the country’s main export earner.
Negotiations with some smaller creditors – notably Afreximbank – are still unresolved, leaving a tail of uncertainty over the true long-term debt service profile.

The risk, as several African debt-justice groups and domestic analysts have warned, is that Zambia could “graduate” out of default only to slide back into trouble if growth disappoints, copper prices fall, or future governments relax fiscal discipline once the immediate pressure of restructuring fades.

In other words, the double upgrade marks the end of the emergency phase – not the end of the story.

Where Verī Platform fits into Zambia’s “investable again” moment

For investors in Africa and beyond, this is exactly the point at which good infrastructure for risk and access matters most.

Regional pension funds, insurers, banks and asset managers are already asking three questions:

How do we re-enter Zambia without over-concentrating risk?
How do we combine local-currency and hard-currency exposures in a way that our regulators and trustees can clearly see and understand?
How do we adjust quickly if the macro story changes again?

Verī Platform exists to sit behind those regulated institutions and provide that structure.

Within one regulated environment, a firm using Verī can:

Hold Zambian sovereign and quasi-sovereign exposures – restructured Eurobonds, kwacha-denominated government paper, and Lusaka-listed equities – alongside broader African and global assets such as regional bond funds, global equity ETFs or infrastructure vehicles;
Connect to multiple custodians and trading venues while maintaining a single, look-through ledger that reconciles all client positions daily;
Generate supervisor-ready reporting that breaks down exposure by country, currency, issuer and sector – making it straightforward to show, for example, that Zambia is 6% of a portfolio rather than 26%, or that copper-linked assets are capped at a defined level.

For a Kenyan or Ghanaian pension fund considering a measured return to Zambia, that might translate into:

A small basket of Zambia’s new-look Eurobonds;
Selected stakes in copper producers or Zambian financials;
Offsetting positions in other African and global markets, all governed by pre-set limits coded into the platform’s portfolio models.

In a frontier market where every upgrade can tempt investors to over-reach, that combination of access, diversification and control is not a luxury – it is part of responsible fiduciary management.

A window of credibility

Zambia’s twin upgrades from S&P and Fitch mark an important psychological shift: after half a decade with “default” etched into its rating line, the country now has a narrow but real window of credibility.

If the government uses it well – closing the remaining restructuring gaps, keeping to IMF-backed fiscal paths, and channelling new investment into productive sectors rather than prestige projects – the move from RD and SD to B- and CCC+ could be the first step on a long, steady climb up the ratings ladder.

If it doesn’t, the upgrades will be remembered as a brief detour in a longer story of boom, bust and bailout.

For now, however, the message to investors is clear: Zambia is back on the map. The challenge – for Lusaka and for the institutions that allocate capital across Africa – is to make sure that this time, the journey out of crisis leads to more than just another round trip.

#Zambia #DebtRestructuring #Fitch #SPGlobal #IMF #AfricanMarkets #Eurobonds #FrontierMarkets #VeriPlatform

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