PRETORIA– U.S. ratings agency Moody’s has kept South Africa’s sovereign rating unchanged at investment grade while upgrading the outlook to stable, according to an announcement.
In a statement, Moody’s confirmed the long-term issuer and senior unsecured bond ratings of the South African Government at Baa3, while changing the outlook to stable from negative. The rating concluded the review for downgrade that had commenced on Nov 24.
Moody’s rating system has 23 levels and Baa3 is the 10th, meaning an obligator has adequate capacity to meet its financial commitments.
“The confirmation of South Africa’s ratings reflects Moody’s view that the previous weakening of South Africa’s institutions will gradually reverse under a more transparent and predictable policy framework,” the agency said.
The recovery of the country’s institutions will, if sustained, gradually support a corresponding rebound of its economy, along with the stabilization of fiscal strength, the agency said, adding that the stable outlook reflects a careful balance of risks behind the rating.
“The new administration under President Cyril Ramaphosa faces equally significant opportunities and challenges,” it said.
Steady progress in meeting the objectives set out in the new president’s State of the Nation address last month will be needed if the recovery in confidence, that is essential for South Africa’s economic and fiscal prospects, is to be sustained, Moody’s said.
It also said success in meeting the objectives offers the prospect of a virtuous circle of economic recovery, fiscal consolidation and rising social cohesion, while the failure, at least as perceived by investors or voters, could lead to a further cycle of eroding economic, fiscal and institutional strength.
“The political, policy and practical challenges of meeting diverse economic, social and fiscal objectives cannot be underestimated,” the agency said.
Of the three major international rating agencies, Moody’s is the only one that has kept South Africa’s rating at investment grade.
Both Standard and Poor’s and Fitch downgraded the country’s rating to junk status, or “BB ” last year and kept it unchanged so far.
Source: NAM NEWS NETWORK