Standard and Poor’s (S&P) has joined other international ratings agencies in raising its long term foreign currency ratings on South Africa, the National Treasury said on Thursday.
The Treasury said S&P raised its long term foreign currency rating on South Africa to ‘BBB’ from ‘BBB-, and its local currency ratings to ‘A/A-1 from ‘A-/A-2’. At the same time, the ‘A-3’ short term foreign currency ratings of the Republic were affirmed. The outlook is stable.
Treasury representative Logan Wort said: ”The upgrade comes as no surprise and reflects the continued strength of South Africa’s macro-economic performance and improvements in the country’s external position.
”Standard and Poor’s cites South Africa’s track record on fiscal management as the key factor underpinning improvements in South Africa’s credit.”
S&P found the government’s strategy of broadening the tax base and improving tax administration underpinned a strong revenue performance providing government spending flexibility.
This enabled a cautious shift towards a growth orientated fiscal stance, with higher infrastructure and social expenditure, and tax cuts for lower and middle income households.
S&P praised the Reserve Bank’s monetary policy, highlighting that the country’s external position and liquidity are improving.
The phasing out of the Reserve Bank’s net open forward position and the gradual relaxation of exchange controls were also highlighted as underpinning the improvements in the South African credit.
The credibility of inflation targeting was seen as one of the contributory factors in ensuring prudent monetary policy. – Sapa