Covid-19: Moody’s downgrades SA to junk, ‘could not have come at a worse time’
The Covid-19 pandemic has created uncertainty in many financial markets, affecting many sectors of the economy.
National Treasury said the recent downgrade by Moody’s Investors Service could not have come at a worse time as South Africa, like many countries in the world, struggle to contain the outbreak of Covid-19.
Moody’s decision was released late in the evening of 27 March. South Africa’s long-term investment foreign and local-currency debt ratings were downgraded to junk from ‘Baa3 to Ba1’, maintaining a negative outlook. The main two reasons Moody’s provided is the structurally very weak growth and constrained capacity to stimulate the economy and the increasing government debt over the medium term.
The Covid-19 pandemic has created uncertainty in many financial markets, affecting many sectors of the economy. South Africa is officially on a 21-day lockdown to stop the spread of the coronavirus, as the country has reached the 1 000 mark of confirmed cases.
National Treasury said in a statement that they are worried about the impact of this downgrade, especially the impact of Covid-19, “The sovereign downgrade will further add to the prevailing financial market stress. These two events will truly test South African financial markets.”
Finance minister Tito Mboweni said it was with a heavy heart that he noted all three major rating credit agencies currently rate South Africa at sub-investment grade, but even in crisis this presents an opportunity, “The opportunity we have today is to unite and work together to address our challenges.”
Moody's has cut SA's credit rating to sub-investment grade. Min @tito_mboweni calls on South Africans to stand and work together now more than ever to fix the economy. South Africa is a phoenix. "In order to rise from its own ashes, a phoenix first must burn," – Octavia Butler. pic.twitter.com/xfElErlD7C
— National Treasury (@TreasuryRSA) March 27, 2020
We shall overcome!
— Tito Mboweni (@tito_mboweni) March 27, 2020
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