MARKET WRAP: Rand drops after S&P cuts SA rating to junk
Ratings agency sends out a stark warning to government to get its house in order
The rand fell 27c to the dollar within minutes of the announcement on Friday that S&P Global had downgraded the country’s local currency debt to subinvestment grade. The ratings agency sent out a stark warning to government to get its house in order, with state-owned companies the biggest contributor to the downgrade. Moody’s, which also released the result of its latest review on Friday, did not alter the country’s rating but placed it on review for a downgrade, which will probably come in February after the budget speech. Moody’s said that if the February budget didn’t return the country to a path of fiscal consolidation, a downgrade was likely. “It remains unclear what assurance should be taken from the government's stated commitment to reduce the funding gap.” It said, however, it recognised that fiscal consolidation would be increasingly challenging without revived growth.
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