Reserve Bank looks into its crystal ball — and the future looks harsh
There is a high risk of more downgrades, says review, and increases in interest rates are likely to follow
South Africa faced a high risk and probability of further downgrades to its credit ratings, which might weaken the currency and lead to higher borrowing costs, the central bank said.Having been cut to junk by both S&P Global Ratings and Fitch Ratings, the country might suffer more of the same as a result of weak economic growth, political developments, liabilities linked to struggling state-owned companies and slow progress in structural reform, the Reserve Bank said in its Financial Stability Review published in Pretoria on Tuesday.S&P and Fitch reduced their assessments on the nation’s foreign-currency debt to below investment grade after President Jacob Zuma fired Pravin Gordhan as finance minister at the end of March in a late-night cabinet reshuffle. While South Africa’s lenders remained well capitalised and carried more cash than regulators required, further downgrades would have a high impact on the country’s financial stability, the central bank said.Representatives from M...
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