World Economy

S. Africa Says Can Repay Debt

S. Africa Says Can Repay DebtS. Africa Says Can Repay Debt

South Africa’s National Treasury says it has enough foreign currency deposits to repay its current and medium-term debt after the country had its credit rating cut to the lowest investment-grade status by Fitch Ratings Ltd., in line with the assessment of Standard & Poor’s.

“Whilst Fitch and S&P rate our foreign currency debt riskier than our local currency debt, government’s total foreign currency debt as percentage of total debt is currently below 10%,” the treasury said in an e-mailed statement Sunday. “Government holds foreign currency deposits that are sufficient to meet its current and medium-term foreign currency commitments,” Bloomberg reported.

The government said it needs to improve economic growth by stabilizing the country’s power supply, changing labor rules to avoid protracted strikes and improving the governance of state-owned companies that are draining resources. The economy, the second-largest in Africa after Nigeria, narrowly avoided a recession in the third quarter, posting 0.7% annualized growth after a contraction in the previous three months.

“Government is aware that the country’s economic growth performance needs to be improved in a sustainable manner and has therefore made the resolution of the energy challenge an immediate priority,” the treasury said.

Falling metal prices, electricity shortages and low global demand have stifled output. The central bank projects gross domestic product will expand 1.4% this year, which would be the slowest pace since a recession in 2009.

Along with improving electricity generation, the government will focus on “rationalizing state holding” of assets and encourage “private-sector participation,” it said.

Fitch cut South Africa’s credit rating one level to BBB- on Dec. 4 and changed the outlook to stable from negative. S&P changed the outlook on its BBB- rating to negative from stable earlier in the day.