The impact of a possible further ratings downgrade on the South African economy and financial system could lead to increased capital outflows, the central bank said on Tuesday.
Ratings agencies have warned of possible ratings cuts should Pretoria show a lack of commitment to reining in its budget deficit.
The warnings came after President Jacob Zuma changed finance ministers twice in less than a week in December, initially replacing Nhlanhla Nene with a little known politician before recalling Pravin Gordhan to the post to calm markets after a run on the rand and bonds.
Standard & Poor’s and Fitch rate South Africa a notch above sub-investment grade, while Moody’s has it two notches above.
“The impact of a further ratings downgrade on the South African economy and financial system could manifest in the form of capital outflows (and) potential spillovers to rand-denominated … government debt,” the central bank said in its financial stability review.
–
Credit: CNBC Africa
