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Moody’s downgrades SA to junk status

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South Africa’s credit ratings was one notch below investment grade

CAPE TOWN – Moody’s Investors Service downgraded South Africa to junk status late on Friday night.

Moody’s downgraded South Africa’s long term foreign and local currency debt ratings to ‘Ba1’ from ‘Baa3’ and maintained the negative outlook. The downgrade meant that South Africa’s credit ratings was one notch below investment grade. 

Moody’s said the key drivers behind the downgrade were structurally very weak growth and constrained capacity to stimulate the economy; and inexorable rise in government debt over the medium term. 

The sovereign downgrade will see South Africa being excluded from the FTSE World Government Bond Index (WGBI) and the government bond market will experience further capital outflows as fund managers with investment grade mandates will be forced to sell South African government bonds.