Finance Minister Tito Mboweni says the decision by two ratings agencies, Fitch and Moody’s, to downgrade the country further into junk is a painful blow to the country as it will have immediate implications for borrowing costs and constrain government’s budget.
The ratings agencies announced their decision on Friday, citing government’s rising debt and the adverse impact of COVID-19 on the economy as reasons for the move.
Media statement – S&P Global Ratings downgrades SA’s sovereign credit ratings, but revises outlook to stable from negative #CreditRatings @tito_mboweni @MogajaneD @DrDavidMasondo @GovernmentZA @GCISMedia pic.twitter.com/Bcy5ob7nvT
— National Treasury (@TreasuryRSA) April 29, 2020
Fitch and Moody’s downgrades South Africa’s sovereign credit rating into further junk status:
In a statement, National Treasury says government’s policy priorities remain economic recovery and fiscal consolidation, as outlined in President Cyril Ramaphosa’s Economic Reconstruction and Recovery plan.
South Africa’s credit rating takes another hit:
Government has accumulated debt of nearly R4 trillion.
Chief Economist at Econometrix Azar Jammine says interest rate payments take up 20% tax, which is unsustainable.
“And interest rate payments are now taking up more that 20% of government tax revenue. This is unsustainable and that is why rating agencies have downgraded us. The worrisome part about it is that Moody’s and Fitch yet again placed us on a negative outlook which means that the downgrades may not be over yet.”