South Africa’s National Treasury has said it sees the downgrade of the country’s debt to junk by Moody’s Investors Service as an opportunity to fix the economy.
The Moody’s announcement, made close to midnight on March 27, 2020, means the country is now “given an opportunity to do the things we are supposed to do,” said Tshepiso Moahloli, acting head of asset and liability management at the Treasury.
The rand plunged to a record low on Monday morning, breaching 18 versus the dollar for the first time.
Moody’s cut its assessment of South Africa’s debt to sub-investment grade, saying unreliable electricity supply, persistent weak business confidence and investment, and long-standing structural labour market rigidities continue to constrain economic growth.
The coronavirus pandemic means the country is entering an expected global downturn in an economically vulnerable position.
Moody’s changed the outlook on the ratings to negative in November 2019 and wanted to see a credible strategy in the February 2020 budget for halting a deterioration in public finances.
However, the spending plans presented by Finance Minister Tito Mboweni last month showed the fiscal deficit as a percentage of gross domestic product would widen to an almost three-decade high, and the economy is projected to contract for a calendar year for the first time since 2009.
