RTTNews - Thursday, rating agency Moody's announced that it has unified South Africa's local and foreign currency ratings at A3.
The rating agency achieved this by upgrading the country's Baa1 foreign currency rating and lowering its A2 local currency rating, each by one notch.
This reflects the fact that both of South Africa's bond ratings seem well positioned at A3 on our global rating scale, in light of reduced external vulnerability and some expected medium-term pressures on the government's total debt metrics, the agency said in a statement.
South Africa's country ceiling for long-term foreign currency debt was upgraded to A1 from A2 and the short-term foreign currency country ceiling was affirmed at Prime-1.
The outlook on the country's foreign currency ratings and ceilings were changed to stable from positive following the upgrades. The agency noted that the outlook on the local currency government rating is also stable on conclusion of the review for possible downgrade initiated in March.
Today's rating action removes the distinction that was once warranted by a relatively weak external position, Moody's Senior Vice President Kristin Lindow said. By moving the two ratings together at A3, they are now consistent with the way Moody's rates the governments of countries that are well integrated into the global economy, making no differentiation in a government's creditworthiness on the basis of currency denomination.
Further, Lindow said that the upgrade of the foreign currency rating to A3 reflects the buildup in official foreign currency reserves and a net foreign asset position in the banking system, which have been achieved in spite of large current account deficits in recent years. Astute government debt management, which relies mainly on South Africa's deep domestic capital markets, has minimized short-term external liabilities so that they are now comfortably exceeded by official foreign currency assets.
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