Fitch Maintains Stable Outlook For South Africa

JOHANNESBURG, Sept 14 (Bernama-Xinhua) -- The South African government has acknowledged Fitch Ratings' decision to reaffirm the country's long-term foreign and local currency debt ratings at "BB-" and to retain the stable outlook, according to the National Treasury on Friday.

According to Fitch, South Africa's credit rating is constrained by several factors, including low real gross domestic product (GDP) growth, which it forecasts to be 0.9 per cent in 2024, 1.5 per cent in 2025, and 1.3 per cent in 2026, reported Xinhua.

Fitch also raised concerns about high poverty and inequality levels, a high government debt-to-GDP ratio, and a rigid fiscal structure that hampers deficit reduction.

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The ratings, however, are supported by a favourable debt structure with long maturities and mostly local-currency-denominated, strong institutions, and a credible monetary policy framework.

"Fitch notes advancements in the implementation of the 35 priority reforms under Operation Vulindlela, initiated in 2020, aimed at modernising network industries such as electricity, water, and transport," said the National Treasury in a statement.

The agency views the Government of National Unity as a factor that reduces short-term policy uncertainty and facilitates the continuation of the implementation of the reform programme, which will contribute to a modest increase in real GDP growth, it said.

The Treasury also noted that Fitch acknowledges South Africa's significant improvements in electricity generation, with no supply interruptions since its last load shedding or power cut in March.

It said 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 further mitigate fiscal risks by reducing borrowing over the medium term through leveraging a portion of valuation gains in the Gold and Foreign Exchange Contingency Reserve Account," said the Treasury.

According to the Treasury, extensive reforms in energy, freight, water, and telecommunications are in progress. The South African government has changed the regulation to allow some private power producers to produce energy to assist the country, which is experiencing a power deficit.

Fitch forecasts South Africa's government debt to continue to rise to 76 per cent of GDP in 2024, 77.8 per cent in 2025, and 78.0 per cent in 2026. 

-- BERNAMA-XINHUA