The South African government welcomes S&P Global Ratings’ decision to revise the country’s credit rating outlook from stable to positive.
The announcement came after Moody’s credit agency raised its forecast for South Africa from negative to stable last month.
Moody’s explained that South Africa’s fiscal position has recovered significantly since the pandemic thanks to government measures on financial consolidation and positive external developments, adding that as a result, the government debt-to-GDP ratio seems to stabilize at around 80% in the medium term.
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S&P said recent favorable trade conditions in South Africa have improved its external and fiscal trajectory.
A fairly large position on the country’s net foreign assets, flexible currency and deep domestic capital markets also provide strong buffers against shifts in external financing.
The agency also expects that in 2022 South Africa will remain the current account surplus for the third year in a row, as prices for basic metals and exports of mining products have risen significantly since the beginning of the Russian-Ukrainian conflict.
According to the agency, there is also some improvement in the implementation of key reform objectives under Operation Wolindle (founded in October 2020 as a joint initiative of the President and the National Treasury to accelerate structural reforms), as well as higher than expected tax revenues.
A statement from the National Treasury said the government was using some of the extra revenue to accelerate debt stabilization, with most aimed at meeting immediate social needs, promoting job creation through the president’s employment initiative and supporting the health sector.
It also added that faster economic reforms, accompanied by fiscal consolidation to provide a stable basis for growth, will contribute to faster recovery and higher levels of economic growth in the long run.
* Compiled by Xanet Shippers.