S&P upgrades South Africa’s credit rating outlook to positive – here’s why


The South African government has welcomed S&P Global Ratings decision to revise the country’s credit ranking outlook to positive from stable.

This announcement comes short on the heels after credit rating agency Moody’s upgraded its outlook on South Africa from negative to stable last month.

Moody’s explained that South Africa’s fiscal position has markedly recovered from the pandemic thanks to government’s fiscal consolidation measures and positive external developments, adding that as a result it looks like the government’s debt-to-GDP ratio will stabilise around 80% over the medium term.

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S&P said recent favourable terms of trade in South Africa have improved the external and fiscal trajectory.

The country’s reasonably large net external asset position, flexible currency and deep domestic capital markets are also providing strong buffers against shifts in external financing.

The agency also expects South Africa to post a current account surplus in 2022 for the third consecutive year, as prices for key metals and mining exports have risen significantly since the start of the Russia-Ukraine conflict.

According to the agency, there has also been some improvement on the implementation of key reform targets under Operation Vulindlela (established in October 2020 as a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms) as well as higher than-expected tax revenue.

In a statement, National Treasury said government is using a portion of the additional revenue to accelerate debt stabilisation, with the majority targeted to address urgent social needs, promote job creation through the presidential employment initiative, and support the public health sector.

It also added that faster implementation of economic reforms, accompanied by fiscal consolidation to provide a stable foundation for growth, will support a faster recovery and higher levels of economic growth over the long term.

*Compiled by Xanet Scheepers.

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