Moody's and Fitch nudge SA closer to junk status with downgrade

Moody's and Fitch nudge SA closer to junk status with downgrade

- South Africa has been downgraded by not one, but two main ratings agencies

- Moody's has downgraded SA' credit rating to BA2, maintaining its negative outlook

- Fitch has also downgraded SA, to BB-, and also has a grim outlook for the nation's future

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South Africa's dire financial situation is not set to change any time soon with both Moody's and Fitch opting to downgrade the nation's credit rating.

Moody's opted to reduce the nation's credit rating to BA2 with a negative outlook announced.

Moody's explained that the expected weakening of the fiscal position provided for implementation risks despite a strategy to improve things.

Moody's and Fitch nudge SA closer to junk status with downgrade
Moody's and Fitch have both downgraded SA's credit rating. Image: Michael Nagle/Bloomberg and Classen/ullstein bild
Source: UGC

Fitch also downgraded SA's credit rating from BB to BB-, also with a negative outlook for the nation.

Fitch noted the government's already high and rising state debt in addition to weak growth and high inequality.

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Both ratings agencies are worried about the current fiscal position in the wake of the national lockdown.

S&P Global opted to keep its ratings at BB- for its foreign currency rating and BB for local currency, with a stable outlook for both.

Earlier, reported that Finance Minister Tito Mboweni had warned against SA's debt crisis while tabling his Medium-Term Budget speech last month.

Minister Mboweni has likened the economy at the moment to the dawn of democracy in South Africa:

"We must rebuild our economy, rehabilitate our public finances and recover from the devastation wrought upon us by Covid-19. As we rose to that fiscal challenge, so we will rise to this one."

The economy is expected to contract 7.8% this year, and the 2021 outlook is more uncertain. Job losses have bee 'particularly severe' acknowledges Mboweni.

Mboweni warned that the level of state debt is high, cautioning against following the same fate as other nations who failed to stabilise government spending.

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