The Democratic Alliance (DA) says the ratings downgrades by Moody’s and Fitch are votes of no confidence in President Cyril Ramaphosa’s management of South Africa’s economic reform agenda. Both agencies cite a weakening fiscal position, rising government debt and the economic impact of the coronavirus as reasons for the downgrades.
The DA says the downgrades follow what the party calls Finance Minister Tito Mboweni’s disappointing Medium Term Budget Policy Statement where he announced another bailout for SAA – this time to the tune of over R10 billion.
— Democratic Alliance (@Our_DA) November 21, 2020
Meanwhile, 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.
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.
Government has accumulated debt of nearly R4 trillion.
Treasury has warned that the further credit ratings downgrades by Fitch and Moody’s will lead to deteriorating asset values – including that of retirement funds and savings.
Chief Economist at Econometrix Azar Jammine says, “And interest rate payments are now taking up more than 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.”