S&P decision on foreign currency sovereign credit rating welcomed

NATIONAL Treasury has welcomed Standard & Poor’s decision to maintain South Africa’s sovereign credit rating with a long-ter m foreign currency sovereign credit rating of “BB+”, and a long-ter m local s overei g n c ur re ncy credit ratings of “BBB”, with a “negative” outlook.

S&P said yesterday it was affirming its negative outlook on the foreign and local currency ratings because of political volatility and uncertainty about fiscal policy.

The ratings agency said the pace of economic growth remained “weak, posing risks to the pace of fiscal consolidation, with rising contingent liabilities, and South Africa’s ability to reduce economic inequalities in the medium term”.

The Treasury said it also “noted” both the affirmation of the longter m foreign currency rating of “BB+” and the negative outlook on the ratings.

“While the gover nment agrees with S&P that the pace of economic growth is slow and as such poses risks to fiscal consolidation and rising contingent liabilities, the fiscal policy stance continues to be guided by chapter 13 of the constitution,” Treasury said in a statement.

“It states that while there is promotion of efforts aimed at economic development, good governance, social prog ress and rising standard of living for all South Africans, there must also be transparency, accountability and sound financial controls in the management of public finances.”

Treasury said the key focus was to safeguard confidence and reclaim the investment grade ratings. It said sustainable fiscal policy and efforts to tackle sources of low g rowth was critical. “Gover nment is currently re-engaging with the private sector to make sure the joint work of government, business, labour and the civil society continues and that the pledges made thus far are fulfilled.

“The work to improve governance and financial challenges in the state-owned companies is also on track.”

Treasury also said the gover nment was committed to work with its social partners in improving business and consumer confidence, adding that the National Development Plan continued to be the anchor policy.

“The constitution remains explicit in realising the fundamental rights of all who live in South Africa and that the public funds are spent for a common good.” – ANA