Fitch Ratings keeps SA on stable outlook
Ratings agency Fitch has affirmed South Africa’s long-term foreign and local currency debt ratings at BB- and maintains a stable outlook for the country, National Treasury said in a statement on Friday.
"According to Fitch, South Africa’s credit rating is constrained by several factors, including low real GDP growth, high poverty and inequality levels, a high government debt-to-GDP ratio, and a rigid fiscal structure that hampers deficit reduction."
The ratings were supported by a favorable debt structure with long maturities and mostly local-currency-denominated, strong institutions, and a credible monetary policy framework.
Fitch has noted the advancements in the implementation of the 35 priority reforms under Operation Vulindlela, initiated in 2020, aimed at modernizing network industries such as electricity, water, and transport.
The agency viewed the Government of National Unity (GNU), as a factor that reduces short-term policy uncertainty and facilitates the continuation of the implementation of the reform program, which will contribute to a modest increase in real GDP growth.
"Fitch also acknowledges significant improvements in the electricity generation, with no supply interruptions since March 2024 and the potential for further increase in the short term", the statement read.
The government’s strategy for fiscal consolidation over the medium term involves exercising expenditure restraint and implementing moderate revenue increases while continuing to support the social wage and ensuring additional funding for critical services.
Furthermore, the government has decided to mitigate fiscal risks further by reducing borrowing over the medium term through leveraging a portion of valuation gains in the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
Extensive reforms in energy, freight, water, and telecommunications are also in progress.
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