- Credit rating agencies Standard & Poor (S&P) and Fitch’s recent assessment of South Africa’s investment grading has put South Africa’s long term foreign and local currency debt ratings at ‘BB and ‘BB’, respectively.
- The National Treasury in a statement explained that according to the rating agency, South Africa’s near-term economic performance and current account are experiencing a cyclical uplift.
Credit rating agencies Standard & Poor (S&P) and Fitch’s recent assessment of South Africa’s investment grading has put South Africa’s long term foreign and local currency debt ratings at ‘BB and ‘BB’, respectively.
The National Treasury in a statement explained that according to the rating agency, South Africa’s near-term economic performance and current account are experiencing a cyclical uplift. The development is due to a combination of base effects following a large economic contraction in 2020 and improving terms of trade from higher commodity prices. The statement admits that structural constraints, a weak pace of economic reforms, and slow vaccination rates will continue to pose challenges for medium-term economic growth and limit the government’s ability to contain the debt-to-GDP ratio.
Fitch maintained a negative outlook pointing out that South Africa’s rating is limited by high and rising government debt, weak growth and high inequality that will complicate consolidation efforts
The Treasury acknowledged the negative outlook due to the substantial risks to debt stabilisation despite the better than expected fiscal outturns in the fiscal year ending March 2021. The Treasury assured the government’s commitment to address the challenges the country’s credit ratings face. The statement added that the government will work towards fast-tracking the implementation of critical reforms that raise economic growth and improve fiscal sustainability. Rating agencies have pointed out that South Africa enjoyed certain rating strengths. These include a credible central bank, a flexible exchange rate, an actively traded currency, deep capital markets as well as a favourable debt structure that could help counterbalance low economic growth and fiscal pressures.
