SA downgrade will not immediately affect Nam's credit rating

07 Apr 2017 18:50pm
WINDHOEK, 07 APR (NAMPA) - South Africa’s sovereign credit ratings downgrade will not have immediate implications for Namibia’s credit rating, but will affect the country and Common Monetary Area through the currency peg and financial markets channels.
This was said by Minister of Finance Calle Schlettwein in the National Assembly on Thursday.
Credit rating agency Standard and Poor's (S&P) downgraded South Africa's rating to junk status on Monday, after the country experienced a fall in the Rand after a cabinet reshuffle last week.
A downgrade to junk status takes a country from investment grade to non-investment grade.
Schlettwein said the revision of South Africa’s credit rating resulted in a weaker Rand, which increased the cost of borrowing for foreign currency denominated bonds and a relatively high import bill and implications for the current account of the balance payments.
This, the minister said, could result in a potential rise in inflation due to weaker currency and exchange rate depreciation across through the currency peg mechanism.
Schlettwein added that the potential slowdown in investment activity would also have an impact on the fragile economic growth prospects for South Africa and its effect on trade in the region.
He noted that the credit ratings downgrade has far-reaching implications for Namibia, as South Africa is a key trading partner for the country and the region’s largest economy with significant industrial linkages and supply chains.
S&P cited political, institutional and policy uncertainties, potential economic shifts which compromise economic growth and sustainable fiscal outcomes, as well as erosion of confidence between government, business and investors as its reasons for the downgrade.
South Africa’s credit rating was on Friday downgraded to junk status by a second credit rating agency – Fitch Ratings Agency, which cited the country’s political status which could weaken government and financial structures.
Schlettwein said the government’s priority policy position is to strengthen macroeconomic stability and fiscal sustainability through a pro-growth stability and fiscal sustainability that is espoused in the 2017/28 Appropriation Bill and Medium Term Expenditure Framework (MTEF).
“Namibia believes in the credibility and sanctity of its medium-to-long term policies which we have adopted to address our own ratings weaknesses raised by the ratings agencies and our firm commitment to follow through on these commitments,” he said.