Credit rating agency Moody’s on Friday revised its outlook on South Africa to positive from stable, citing strengthening fiscal performance and progress on structural reforms.
It, however, maintained the country’s long-term foreign and local currency issuer ratings at “Ba2”. The government welcomed the decision.
Africa’s most industrialised economy has, for more than a decade, grappled with steadily rising public debt, driven by weak growth, repeated support for state-owned companies, and the impact of the Covid‑19 pandemic.
While investor sentiment has improved on signs of fiscal discipline from the finance ministry, the Iran war has clouded the growth outlook for net energy importers such as South Africa, which remain highly vulnerable to rising fuel prices.
The ratings agency said the positive outlook reflected a rising primary surplus, improving debt service costs, and expectations that government debt would stabilise in the short-term and begin a gradual decline.
South Africa’s heavy debt burden, interest payments for which eat away a large share of its revenue, is slowly easing as the government reins in spending, boosts tax intake, and pushes reforms to revive growth and curb borrowing.
Despite the improved outlook, Moody’s said South Africa’s ratings remained constrained by factors including weak fiscal and economic fundamentals, low growth potential and high inequality.
Moody’s added that continued fiscal discipline could eventually put the debt burden on a clearer downward path.
S&P Global upgraded South Africa’s sovereign rating to “BB” from “BB-” in November, handing the country its first credit rating upgrade in nearly 20 years.
Reuters
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