South Africa is preparing itself for the possibility that Moody\u2019s may downgrade the country’s sovereign credit rating to sub-investment grade.<\/p>\n
Moody\u2019s is currently the only major ratings agency that has South Africa at investment grade – one notch above junk – with a stable outlook.<\/p>\n
The country has been rated below investment grade since 2017 by ratings agencies Standard & Poor and Fitch.<\/p>\n
Should the agency also downgrade South Africa to junk status, the country would no longer be eligible for inclusion in debt gauges such as Citigroup Inc\u2019s World Government Bond Index (WGBI).<\/p>\n
A downgrade may also have an effect on the rand, says chief trader at Standard Bank Warrick Butler, who was speaking in an interview with Reuters<\/a><\/strong>.<\/p>\n “A downgrade by Moody\u2019s, which is considered highly unlikely by most commentators, will push the rand back into the R15-area and maybe even R16<\/strong> depending on market positioning,” he said.<\/p>\n “While another stay and an acceptable MTBPS and we should see R14.35 or even R14.20<\/strong> swiftly afterwards,” Butler said.<\/p>\n Not all doom and gloom<\/strong><\/p>\n As weak as the country\u2019s finances are, a new Reuters<\/a> <\/strong>poll predicted unanimously that South Africa would avoid a credit rating downgrade when Moody\u2019s reviews its status.<\/p>\n