PRETORIA - The South African government has "noted" international ratings agency S&P Global’s decision to affirm South Africa’s long-term foreign and local currency debt ratings at "BB-" and "BB" respectively and maintain a stable outlook, the National Treasury said on Saturday.
This means that South Africa's credit ratings by S&P remain non-investment grade.
"According to S&P, South Africa’s fiscal position remains weak, and a large coronavirus (Covid-19)-related fiscal package has further exacerbated fiscal problems, which means the country will have to grapple with a large debt burden as a percentage of GDP and substantial contingent liabilities," the Treasury said in a statement.
Furthermore, the economy faced a sharp Covid-19-related contraction. The stable outlook reflected the balance between pressures related to very low GDP growth and high fiscal deficits against the country’s deep financial markets and monetary flexibility.
Government had acted decisively to prioritise the health and lives of all South Africans. It had now adopted a risk-adjusted approach to reopening the economy, with the initial easing of lockdown measures on May 1, and further easing expected from June 1, the Treasury said.
Furthermore, government’s R500 billion fiscal support package, alongside the monetary policy response, would provide substantial support to the economy. In June 2020, a special adjustments budget would set out a range of economic reform proposals and measures to stabilise public finances.
S&P's affirmation on Friday followed the rating agency’s out of schedule credit rating action on April 29. Under the European Union (EU) credit rating agencies (CRAs) regulation 1060/2009, the ratings on South Africa were subject to certain publication restrictions, including publication in accordance with a pre-established calendar.
According to that calendar - published by S&P on December 20, 2019 - the first scheduled publication on South Africa’s sovereign rating was May 22, 2020. As a result, S&P had published Friday's credit rating action despite the recent out of schedule publication on April 29, the Treasury said.