The South African National Treasury says that it has noted Fitch Rating’s decision to downgrade SA’s long-term foreign and local currency debt ratings further into non-investment by one notch from BB+ to BB.
Fitch attributed the downgrade to the lack of clear paths by government on how it will stabilise its debt.
It also cited the expected impact of the coronavirus (COVID-19) on public finances and economic growth as reason for the downgrade.
Fitch joined Moody’s as the latest rating agency to downgrade the South African economy.
The government said in a statement that it is prioritising the implementation of measures announced by President Cyril Ramaphosa aimed at containing COVID-19 and limiting its impact on the economy.
“In the midst of the prevailing financial markets stress emanating from COVID-19 and credit ratings downgrades by Moody’s and Fitch, government reiterates its commitment to implement structural economic reforms to address weak economic growth, constrained fiscus and ailing state-owned companies. Furthermore, government continues to prioritise and implement measures announced by the President aimed at containing the spread of COVID-19 as well as limiting its impact on the economy.”
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Fitch, however, acknowledged South Africa’s resilience to external shocks.
“We do not expect acute problems in fiscal; financing, partly reflecting the unusually long average maturity of government securities (15 years) and the low share of foreign-currency debt in total debt (10%),” the agency said.
Minister of Finance Tito Mboweni said in a statement non-investment grade ratings have had an undesirable implication for the whole economy.
“To assure all South Africans, government is seized with addressing and minimising the impact of COVID-19, implementing measures to improve economic growth and setting government finances on a stable trajectory. This work requires close collaboration and coordination across various sectors of the economy.”