Treasury says ‘urgent’ Eskom plan in pipeline

Staff Writer | Jul 31, 2019
The National Treasury said in response to ratings agency Fitch’s decision to maintain South Africa’s foreign and local currency credit ratings below investment grade that ‘tough decisions’ were needed.

The government said it was ‘urgently working on stabilising Eskom while developing a broad strategy for its future’.

The National Treasury said in a statement: ‘Government notes Fitch’s decision to affirm South Africa’s long-term foreign and local currency debt ratings at ‘BB+’ and to also revise the outlook to negative. South Africa’s foreign and local currency credit ratings by Fitch remain below investment grade.’

Fitch had noted ‘a marked widening in the budget deficit as a result of lower GDP growth and increased spending, including state-owned enterprise support, increasing our projections for government debt/GDP and heightening the difficulty of stabilising debt/GDP over the medium-term.’

The National Treasury said the government ‘is aware of the strain and risk that SOCs, particularly Eskom, present to the fiscal framework’, adding that it would ‘have to make tough decisions in order to reverse the country’s debt trajectory and improve economic growth prospects’.

The government said Fitch ‘has acknowledged that government is making efforts to boost growth, through amongst others, the investment drive initiated by the President, measures to accelerate infrastructure investment, measures to reduce costs in transport and telecommunications as well as improvements in visa regulations in order to strengthen tourism’. The agency had also acknowledged ‘the credibility of the South African Reserve Bank’ and that its inflation-targeting regime ‘remains an important credit strength’.

A team of officials led by the Directors-General of National Treasury and Public Enterprises ‘have considered a number of options as a solution to Eskom’s debt challenge in order to ensure its sustainability, and the most viable of these will be communicated in due course’.

 

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