Two major credit ratings agencies, Fitch and Moody’s, have both said that they are unconvinced by the debt stabilization plan announced by finance minister, Tito Mboweni, in his supplementary budget last week.
Fitch said that the debt stabilization plan was ‘unlikely to be achieved’ due to a weak economy and political opposition to structural reforms. Moody’s also cast doubt on the plan. It said: ‘Given South Africa’s weak track record of fiscal consolidation in recent years and the weak medium-term economic outlook, debt stabilisation by 2023 will be very difficult to achieve.’
Both Fitch and Moody’s already have South Africa on a ‘negative’ outlook, meaning that they expect South Africa’s fiscal position to continue to deteriorate.
Mboweni’s supplementary budget said that the economy would decline by seven percent this year with debt reaching more than 80% of GDP this year. In Mboweni’s February budget speech debt had been forecast to be 65.6% of GDP.
In his supplementary budget Mboweni said that unless something drastic was done, debt would reach 140% of GDP before the end of the decade. He also warned that the country faced a sovereign debt crisis unless something was done.