S. Africa trying to prevent further credit rating downgrade: President Zuma

The South African government has approached its economic policy, including fiscal policy, prudently to preserve the country's credit rating, President Jacob Zuma said Tuesday.

The government always seeks to ensure macroeconomic stability and sustainable public finances, Zuma said while answering questions from MPs in the National Council of Provinces.

"There is no doubt that adhering to this approach has helped preserve South Africa's credit rating," said the president.

Addressing concerns over possible downgrading of the country's credit rating, Zuma said that while ratings agencies are an important feature on the world economy, they do not necessarily impact on agreements between countries.

Credit rating agencies assess the ability of debtors to pay back the money they owe. Depending on their assessment, they issue credit ratings for sovereign borrowers such as the South African government as an indication for investment.

Since most countries depend on international investors and access to international capital markets, good credit ratings are very important, Zuma said.

It is widely expected that South Africa's sovereign ratings would be downgraded to junk status in the coming months owing to a number of risks the country faces, including poor economic performance, political uncertainties and failure to restructure state-owned enterprises.

After being downgraded by Fitch, Standard & Poor's and Moody's late last year, South Africa's credit rating stands at BBB- and Baa3 (a rating equivalent), respectively. That means the country is at very real risk of becoming a "junk" country, which will have substantial implications for investment.

Standard & Poor's has warned that any deviation from the South African fiscal policy could lead to a credit downgrade. Enditem