S. Africa pledges to address concerns identified by Fitch

S. Africa pledges to address concerns identified by Fitch
# 11 January 2013 23:58 (UTC +04:00)

Baku-APA. The South African government is consistently making efforts to address the concerns identified in Fitch's rating review, the National Treasury said on Friday, APA reports quoting Xinhua.

The Treasury made the statement after rating agency Fitch downgraded South Africa's long term foreign currency credit rating to "BBB" from "BBB+", the long term local currency credit rating to "BBB+" from "A" and the short term credit rating to "F3" from "F2".

Fitch placed the country on a stable credit outlook.

Fitch cited the following factors as reasons for the downgrade:

-- South Africa's economic growth performance has deteriorated which it said was likely to affect public finances and exacerbate social and political tensions;

-- A secular decline in competitiveness which reflects wage settlements above productivity and infrastructure constraints which it believes to have contributed to a widening current account deficit;

-- The country's public finances have deteriorated; and

-- Social and political tensions have increased.

In response to the downgrade, the Treasury said some of the drivers of the downgrade have their roots in the protracted crisis in the Eurozone, South Africa's significant trading partner.

"Government is aware of the challenges of poverty and unemployment the country is facing," the Treasury said.

The Treasury blamed the Fitch report for failing to "fully appreciate" the South African National Development Plan (NDP), which identifies the constraints to faster growth and presents a roadmap to a more inclusive economy that will address South Africa' s socio-economic imbalances and challenges.

The plan was endorsed by the ruling African National Congress (ANC) at its 53rd elective conference in December.

"The conference resolutions give certainty on economic policy, which the Fitch report does not seem to fully appreciate," the Treasury said.

"Government will prioritize the implementation of the NDP with the aim of achieving higher levels of growth."

The 2012 Medium Term Budget Policy Statement (MTBPS) published in October sets out a disciplined fiscal framework that keeps unchanged the expenditure envelope that was published in February, the Treasury said.

"It (the MTBPS) balances support for the economy in the immediate term with fiscal consolidation over the medium to long term. It provides for a sustained investment in growth inducing infrastructure," said the Treasury.

"The budget framework set out in the MTBPS demonstrates government's unambiguous commitment to maintaining debt and expenditure growth within sustainable levels. These principles will continue to underpin South Africa's fiscal stance."

Two other rating agencies -- Moody's and Standard & Poors -- also downgraded South Africa's rating last year.