Reserves build up could ensure upgrade: Moody’s

    Cape Town, Mar 18 (I-Net Bridge) - The build up of South Africa’s foreign exchange reserves is assuring resilience to market turbulence, ratings agency Moody’s senior vice president for sovereign credit in Europe and Africa, Kristin Lindow, said Thursday.
    According to Lindow, South Africa’s modest foreign debt exposure by both government and the country as a whole has reduced vulnerability to exchange rate volatility and the country is nearly impervious to sudden stops.
    Speaking at a conference on sub-Saharan credit risk in Cape Town, Lindow reckoned that the floating exchange rate also provides a cushion in the event of capital outflows.
    She suggested that there could be the possibility of an increase in the country’s rating from the present A3 with a stable outlook if there was a further build up in foreign liquidity - “especially if tested amidst the removal of capital controls,” she said. 
    She also indicated that the removal of capital controls on residents is getting closer, although she insisted that officials from the National Treasury are obviously very, very close-mouthed about such a possibility.
   She said that another indicator for a ratings upgrade would be clear signs that the trade and current account deficits are sustainable, and that there would be clarity about economic policy continuity throughout the new administration. 
   She also wanted to see evidence that the growth potential of the economy has accelerated beyond 5%, with non-vulnerable financing of the current account deficit.
   She said that currently the growth potential is between 3% and 4.5%. 
  
     By Michael Hamlyn
    I-Net Bridge.
    Copyright 2010 I-Net Bridge. All rights reserved.

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