CAPE TOWN – With just two days to go before Moody’s updated the country’s rating, Finance Minister Tito Mboweni said that he expected the credit ratings agency to understand the difficulty the country was in.
Although economists have said the country would likely dodge a rating cut, concerns had been raised about whether this would remain the case following Mboweni’s bleak Medium-Term Budget Policy Statement (MTBPS).
The statement said that a downgrade by Moody’s to sub-investment grade would increase borrowing costs and reduce the range of institutions that could invest in government bonds.
However, when asked about the potential impact of the MTBPS that exposed just how vulnerable the South African economy was, Mboweni appeared confident about Friday’s ratings decision.
He was speaking to reporters before he tabled the statement in Parliament on Wednesday.
“The ratings agencies will understand the difficulties we are in and the actions we are taking to put the country’s finances on a proper footing.”
Reserve Bank Governor Lesetja Kganyago also weighed in on the matter.
“All that the rating agency does is to assess whether based on the policies you have adopted, whether you would be able and willing to repay the debt that you raise.”
Meanwhile, the rand weakened by nearly 2% against the US dollar this afternoon as Mboweni outlined that the country was struggling with high national debt levels that could peak at 70% of the GDP and a budget deficit among other difficulties.
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