Government has acknowledged S&P’s decision to lower South Africa’s long-term foreign and local currency debt ratings further into non-investment grade, to BB- and BB, respectively.
While the government is “disappointed” by the decision to downgrade the country’s sovereign rating “at a time when South Africa is facing one of its most challenging times”, it did, however, welcome the ratings agency’s revision of the outlook from negative, to stable.
Government considers this an indication that the agency “at least recognises some of government’s fiscal and monetary policy measures as strong points”.
According to S&P's, South Africa’s downgrade is owing to Covid-19-related pressures that will have “significant adverse implications” for South Africa’s already deficient growth and fiscal outcomes”.
The stable outlook, however, reflects the balance between pressures related to very low gross domestic product (GDP) growth, as well as high fiscal deficits against the country’s deep financial markets and monetary flexibility.
Meanwhile, government on April 30 said it continued to prioritise measures announced by President Cyril Ramaphosa, which are aimed at containing the spread of the virus and further acknowledges the negative impact Covid-19 has had on economic activity.
In further responding to the Covid-19 pandemic, government has announced a fiscal package amounting to R500-billion.
In addition, the President on April 23 also announced a gradual reopening of the economy from May 1, under strict conditions.
This means that some businesses will be allowed to resume operations subject to extreme precautions to limit community transmissions and outbreaks of Covid-19.