Moody’s credit upgrade: Government says it is ‘able to reprioritise spending’

National Treasury has welcomed Moody’s decision to upgrade South Africa’s credit rating from negative to stable.

According to the credit rating agency, the key driver behind its decision is the improved fiscal outlook that raises the likelihood of government’s debt burden stabilising over the medium term.

“South Africa’s fiscal position has markedly recovered from the pandemic thanks to government’s fiscal consolidation measures and positive external developments,” said Moody’s.

“Additionally, over the last two fiscal years, government has shown it was able to reprioritise its spending while staying committed to fiscal consolidation, which Moody’s expects will remain the case going forward,” said the department in a statement.

Government’s steadfast commitment to restoring sustainability to public finances is supported by better-than-expected revenue collection.

For the period ending 31 March 2022, Sars collected a gross amount of R1 884.9 billion (R1 540.5 billion in the prior year).

Offset by refunds of R321.1 billion (R290.7 billion in the prior year), this results in net collections of R1 563.8 billion, which represented a surplus of R314.0 billion (25.1%) against the prior year 2020/21.

“As stated in the 2021 MTBPS and 2022 Budget, government is using a portion of the additional revenue to accelerate debt stabilisation, with the majority targeted to address urgent social needs, promote job creation through the presidential employment initiative, and support the public health sector,” said the department.

“Faster implementation of economic and SOC reforms, accompanied by fiscal consolidation to provide a stable foundation for growth, will ease investor concerns and support faster recovery and higher levels of economic growth,” it added.

Moody’s credit upgrade from negative is a positive sign from the downward trend that began during former President Jacob Zuma’s reign.

Back in 2020, the same agency downgraded South Africa to junk status. But its new assessment of the country’s debt is still a level higher than those of S&P Global Ratings and Fitch Ratings.

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