Government has noted Fitch’s decision to affirm South Africa’s long-term foreign and local currency debt ratings at ‘BB-’ and maintain the stable outlook.
According to the ratings agency, South Africa’s credit rating is constrained by several factors. These include low real GDP growth, high poverty and inequality levels, a high government debt-to-GDP ratio, and a rigid fiscal structure that hampers deficit reduction.
However, the ratings are supported by a favourable debt structure. With long maturities and mostly local-currency-denominated and strong institutions and a credible monetary policy framework.
Advancements in the implementation of reforms
The National Treasury said Fitch noted advancements in the implementation of the 35 priority reforms under Operation Vulindlela. These were initiated in 2020, and are aimed at modernising network industries such as electricity, water, and transport.
“The agency views the Government of National Unity (GNU), where… the ANC remains the largest party. It views it as a factor that reduces short-term policy uncertainty. And also facilitates the continuation of the implementation of the reform programme. This will contribute to a modest increase in real GDP growth.
“Fitch also acknowledges significant improvements in the electricity generation. With no supply interruptions since March 2024. And the potential for further increase in the short term,” said Treasury in a statement on Friday.
It said government’s strategy for fiscal consolidation over the medium term involves exercising expenditure restraint. It also involves implementing moderate revenue increases. While continuing to support the social wage and ensuring additional funding for critical services.
Mitigate of fiscal risks
“Furthermore, government has decided to further mitigate fiscal risks. This …by reducing borrowing over the medium term. And through leveraging a portion of valuation gains in the Gold and Foreign Exchange Contingency Reserve Account (GFECRA). Extensive reforms in energy, freight, water, and telecommunications are also in progress.”
Fitch forecasts South Africa’s government debt to continue to rise to 76 percent of GDP in 2024. At 77.8 percent in 2025, and 78.0 percent in 2026.
Visit SW YouTube Channel for our video content
- SAnews.gov.za
