Moody’s has given the government a chance to improve, Treasury says
Fiscus highlights need to enhance policy certainty, lower debt and restore good governance and financial stability at public institutions and SOEs
The Treasury has welcomed the reprieve from Moody’s.
“It means that [the] government has been given another opportunity to improve on the concerns raised by the rating agency,” the Treasury said in an e-mailed response to Business Day.
“The main focus for [the] government is to regain SA’s investment grade status to make the country an even more attractive investment destination.”
The credit ratings agency did not release a scheduled report on South Africa’s sovereign credit rating on Friday. South Africa’s debt is rated at Baa3 by the agency, one notch above junk status, with a stable outlook.
The Treasury said enhancing policy certainty and credibility, lowering the debt burden as well as restoring good governance and financial stability at public institutions and state-owned entities (SOEs) would help the country to remain above investment grade.
“[The] government will continue to engage with all stakeholders in order to fast track the implementation of growth-enhancing economic reforms,” the Treasury said.
Moody’s is the only major ratings agency that has not already lowered South Africa’s sovereign debt to sub-investment grade.
A downgrade of the rating would be disastrous for South Africa as it would cause large capital outflows by investors who are compelled to invest only in investment-grade entities and because it would raise the cost of borrowing across the economy.
Fitch Ratings and S&P lowered South Africa’s sovereign debt to below investment grade in 2017, in response to a surprise cabinet reshuffle by then president Jacob Zuma.
In March 2018, a change in leadership prompted Moody’s to change its outlook from negative to stable.