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SARB sees high risk of more credit downgrades

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Johannesburg - South Africa faces a high risk and probability of further downgrades to its credit ratings, which may weaken the currency and lead to higher borrowing costs, the SA Reserve Bank (SARB) said.

Having been cut to junk by both S&P Global Ratings and Fitch Ratings Ltd. this year, the country may suffer more of the same as a result of weak economic growth, political developments, liabilities linked to struggling state-owned companies and slow progress in structural reforms, the SARB said in its Financial Stability Review published on Tuesday.

S&P and Fitch reduced their assessments on the country's foreign-currency debt to below investment grade after President Jacob Zuma fired Pravin Gordhan as finance minister at the end of March in a late-night cabinet reshuffle. While the country’s lenders remain well capitalised and carry more cash than regulators require, further downgrades would have a high impact on the country’s financial stability, the reserve bank said.

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