Finance minister Tito Mboweni will use any funding that the International Monetary Fund (IMF) and World Bank make available to support countries through the coronavirus crisis.
This comes after ratings agency Moody’s downgraded the country to junk status at the start of its 21-day lockdown, making it more expensive for the government to borrow on the market.
“This morning in a conversation with the Reserve Bank and the Treasury I indicated that we should proceed and speak to the IMF and the World Bank about any facility that we can access for health purposes,” Mboweni said in an interview with the Sunday Times.
“We take no ideological position in approaching the IMF and World Bank. They are creating facilities for this environment and SA should also take advantage of those facilities in order to relieve pressure on the fiscus.”
Mboweni added that he was not planning on making revisions to the budget at the moment. Instead, government will have to adjust and reprioritise, and see how to manoeuvre if borrowing costs increased, he said.
Ratings firm Moody’s has downgraded South Africa’s credit rating to below investment grade, after three years being the only major firm to keep the country’s head above water.
Moody’s downgraded South Africa’s long term foreign and local currency debt ratings to ‘Ba1’ from ‘Baa3’ with a negative outlook.
According to Moody’s the downgrade comes as South Africa is beaten down by unreliable electricity supply, with persistently weak business environment and low levels of investment.
The country also has a long-standing labour issue, and low levels of flexibility on policy. Effectively, South Africa has a lot of problems, and government isn’t (and can’t) move quickly enough to solve them.
While the coronavirus pandemic is mentioned in the report, the crux of the rating downgrade lies in the country’s other fundamentals.
Following the rating to full junk, South Africa will gradually see a loss in foreign direct investment, as it loses its place in the World Government Bond Index, which will likely happen at the end of April.
This will see around $5 billion (R88 billion) pulled out of the economy.