South African Reserve Bank Deputy Governor Kuben Naidoo said if Moody’s Investors Service cuts the country’s credit rating to junk there could be a selloff of between $5 billion (R75 billion) and $8 billion (R118 billion) of its bonds.
Moody’s this month cut its outlook on South Africa’s rating to negative, meaning the next move could be a reduction to junk because its current assessment is the lowest investment grade.
That would bring it into line with S&P Global Ratings and Fitch Ratings.
Like the other two major ratings companies, it’s concerned by deteriorating government finances and the indebtedness of state-owned companies such as Eskom Holdings SOC Ltd.
Still, the impact on wider markets and the currency would largely depend on the global attitude toward emerging markets at the time the decision is made, Naidoo told journalists in Johannesburg on Wednesday.
“It is very hard to model the impact,” he said.