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,” it noted.
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. -Businesslive