Zambia Achieves Sharpest Frontier Market Rating Recovery in 2025
Zambia has emerged as a leading frontier-market recovery story after securing one of the sharpest sovereign credit upgrades in recent years. Fitch Ratings raised Zambia seven notches from Restricted Default to B-, while S&P upgraded the country from Selective Default to CCC+, signalling restored solvency and renewed investor confidence.
According to Mutisunge Zulu, Chief Risk Officer at Zanaco Plc, the upgrades reflect stabilising fundamentals, stronger liquidity, and Zambia’s return to investor screens as a reform-driven and carry trade destination. “Disciplined policy implementation can shift investor sentiment even in challenging environments,” he said.
The rating improvements mark a structural shift in Zambia’s sovereign risk profile. Post-default spreads are now underpinned by strengthened debt metrics, alignment with the International Monetary Fund (IMF), and a restructuring that resolved over 94% of external debt. The country’s performance has been widely recognised by rating agencies as the leading frontier-market upgrade story of 2025.
Zambia’s recovery follows the 2020 pandemic-era default, which prompted urgent stabilisation measures including debt clearance, structured consolidation, governance reforms in mining and energy, and continuous IMF engagement. These policies laid the foundation for creditor coordination, multilateral support, and renewed international credibility.
The country’s restructuring under the Common Framework is now considered one of the most credible success stories, securing agreement on $3.5 billion of external liabilities.
Copper production and prices have been key drivers of the turnaround. With output rising 18% in the second half of 2025 and prices above $11,000 per ton, mining generates 73% of foreign exchange earnings, 17% of GDP, and 25% of external revenue.
Mr. Zulu noted that higher copper volumes pushed reserves above $5.2 billion, boosting liquidity and strengthening Zambia’s debt-service capacity. Fitch forecasts GDP growth to rise from 5.2% in 2025 to 6% by 2027, supported by mining expansion and agricultural growth.
Macro indicators also signal stabilisation. Inflation has eased to 10.9% and is projected to reach single digits by early 2026. Composite bond yields have fallen to 14.5–19% from over 30% five years ago, while the kwacha has stabilised around K22.8/$ and GDP expanded 4.5% year-on-year in H2 2025. Improved liquidity, firmer policy anchors, and lower borrowing costs are expected to benefit households and businesses across Zambia.
Despite remaining risks, including a $889 million restructuring tail and upcoming elections, Zambia’s sovereign risk profile is steadily improving under IMF oversight. Investors are increasingly viewing the country as a high-conviction frontier-market opportunity, supported by structural spread compression, FX stability, rising copper output, and an improving corporate credit environment.
Mr. Zulu said the upgrades provide broader economic breathing space, lower borrowing costs, greater fiscal flexibility, and a platform for sustained long-term growth.
Zambia has now become the defining frontier-market credit repricing story of 2025, signalling a full reset in sovereign risk and bolstering investor confidence in the country’s economic trajectory.
