ICRAT Implemented in Zambia

A report from a study commissioned by SADC on trends in sovereign reserves management recommended that central bank reserves managers should put in place credit risk analysis systems to support their reliance on major rating agencies. In line with this recommendation, MEFMI developed the Internal Credit Risk Analysis Tool (ICRAT) in order to assist MEFMI member countries to measure and manage credit risk. In this context, the Bank of Zambia requested MEFMI to assist in implementing the ICRAT.

The ICRAT Implementation for Bank of Zambia was carried out remotely using video conferencing facilities from 2 – 13 November 2020. In the wake of Covid19 and the implications for financial markets, ICRAT is very important because it strengthens oversight for sovereign reserves managers. The mission covered taking participants through.

The mission was attended by five (5) participants from Bank of Zambia. The participants were trained on the theoretical background to the use of tools to supplement credit ratings agencies, the mathematical basis of the model which uses market based information to extract implied ratings and the practical use of Bloomberg in data extraction to populate the dataset. Participants then went through the practical use of the ICRAT to carry out data analysis, and interpret results more effectively. It is anticipated that participants will use the knowledge and the ICRAT to strengthen the Bank’s investment risk analysis process.

The mission was facilaited by the ICRAT Technical Working Group team comprising Professor Phillip Mashele, Ms. Chakudza Banda, Ms. Maotlohi Mochebele, Mr Lameck Kakulu, Ms. Sesilia Nambambi and Mr. Alphonse Ndikubwimana. The team was supported by Mr. Patrick Mutimba who was the Task Manager. MEFMI is committed to continue supporting member countries that indicate interest in adopting the ICRAT and follow up with ICRAT users to harvest feedback that will be used to improve the value proposition attributed to the tool.

Prepared by Patrick Mutimba