CAPE TOWN, April 3 (Xinhua) -- The South African government's overall policy orientation remains the same despite the downgrade of the country's sovereign credit, the National Treasury said on Monday.
The government has been, and will remain, committed to a measured fiscal consolidation that stabilizes the rise in public debt, the Treasury said, citing a pledge by Finance Minister Malusi Gigaba.
The Treasury was speaking after international rating agency Standard & Poor's (S&P) on Monday lowered the long-term foreign currency sovereign credit rating on South Africa to 'BB+' from 'BBB-'and the long-term local currency rating to 'BBB-' from 'BBB'.
S&P said in a statement that its decision was based on the cabinet reshuffle effected by President Jacob Zuma last week.
The reshuffle, which saw well-respected former Finance Minister Pravin Gordhan being sacked, put South Africa's fiscal and growth outcomes at risk, the agency said.
"We assess that contingent liabilities to the state are rising," S&P said.
"The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk.
"This has increased the likelihood that economic growth and fiscal outcomes could suffer. The rating action also reflects our view that contingent liabilities to the state, particularly in the energy sector, are on the rise, and that previous plans to improve the underlying financial position of Eskom may not be implemented in a comprehensive and timely manner," the agency said.
It warned that higher risks of budgetary slippage will also put upward pressure on South Africa's cost of capital, further dampening already-modest growth.
The government noted the sovereign rating announcement by S&P, the National Treasury said in a statement.
While S&P has lowered its rating of foreign currency-denominated debt to a sub-investment grade, rand-denominated debt, which constitutes 90 percent of the debt portfolio, retains its investment-grade rating, the Treasury said.
This rating announcement calls for South Africans to reflect on the need to sustain and act with urgency to accelerate inclusive growth and development so that the country can reverse the triple challenge of poverty, unemployment and inequality, the Treasury said.
It said reducing reliance on foreign savings to fund investment and relying less on debt to finance public expenditure will secure South Africa's fiscal sovereignty and economic independence.
"Government remains committed to making sure that its work with business, labour and the civil society continues in order to improve the business confidence and implement structural reforms to accelerate inclusive economic growth," said the Treasury. Enditem
