Credit rating agency Fitch on Friday affirmed South Africa’s long-term foreign and local currency debt ratings at BB- and maintained a stable outlook.
According to Fitch, the affirmation took into account the recent overperformance of revenue and government’s strong efforts to control expenditure, which, if continued successfully, could bring about debt stabilisation. However, the agency assumes a substantial part of recent higher revenues to be temporary and sees current public sector wage demands pointing to increased upward pressure on spending.
The spending estimates tabled at the MTBPS included the offer that the government made to unions at the end of August including: According to Fitch, South Africa’s ratings continue to be supported by a favourable debt structure with long maturities and mostly denominated in local currency as well as a credible monetary policy framework.
“Details are still to be announced, but we assume annual transfers of R50-billion over the next four years, incorporated in our debt forecast as stock flow adjustments. A debt transfer of Eskom debt to the government had been expected for some time and has been incorporated into our rating. We assume the government will separately need to provide cash support to struggling state-owned enterprises as already provisioned for,” Fitch said in a statement.
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