PRETORIA May 2 South Africa's central bank is
concerned about further downgrades to local currency debt and
the impact on the stability of the domestic financial system, it
said in a report on Tuesday.
Africa's most industrialised economy has this year suffered
from credit ratings downgrades after President Jacob Zuma sacked
respected Finance Minister Pravin Gordhan in late March.
"The possibility of further downgrades to South Africa's
local currency rating and South Africa consequently being
excluded from the remaining bond indices is disconcerting," the
bank said in a financial stability review.
The regulator added that should ratings agencies downgrade
South African local currency debt further it could have a
significant impact on the cost of funding and investment flows.
"Market volatility could increase as a result, with sharp
losses likely to be recorded in the currency, bond and equity
markets, thereby negatively affecting the stability of the
domestic financial system," it said.
S&P Global Ratings cut South African foreign debt to
sub-investment grade in April, while Fitch downgraded both the
foreign and local currency debt to "junk" status.
Moody's, two notches above junk status, has put South Africa
on review for a downgrade.
Local currency borrowing makes up about 90 percent of the
South Africa's total 2.2 trillion rand ($165 billion) of debt.
($1 = 13.2956 rand)
(Reporting by Olivia Kumwenda-Mtambo; Editing by Joe Brock)