Rating downgrade to “junk status” is a vote of no confidence in the Presidential Fiscal Committee
Minister of Finance Malusi Gigaba’s strategy to delay the hard decisions necessary to hold the fiscal line and allow the budget to “blowout” with national debt ballooning to R3.4 trillion, or 60% of GDP, in 2020/21 has backfired.
The major ratings agencies, which used to give us the benefit of the doubt, have finally lost patience, with:
- Standard & Poor’s downgrading their sovereign credit rating with a long-term foreign currency rating of “BB”, and a long-term local currency rating of “BB+”, with a “Stable Outlook”; and
- Moody’s affirming their sovereign credit rating with a long-term foreign currency rating, and long-term local currency rating, of Baa3, with a “Negative Outlook”, but triggering a “review for downgrade”, which should be completed sometime after Main Budget 2018.