Cabinet reacts to Moody's rating

Thursday, November 24, 2011

Pretoria - Cabinet has disagreed with a decision by bank rating agency Moody's Investor Service to downgrade the rating of South African banks from "stable" to "negative", saying its economic policies were supportive of growth and competiveness.

"The policy choices are supportive of growth and increasing the competiveness of our economy, enhancing greater investment in infrastructure and clearly indicating a credible fiscal policy trajectory, which ensures counter-cyclicality and debt sustainability," Cabinet spokesperson Jimmy Manyi told a media briefing on Thursday.

Manyi said in its ordinary meeting on Wednesday, Cabinet had shared the same view with National Treasury, which disagreed with the assessment of political risk in South Africa, saying the decision to revise the outlook came after a recent clear fiscal policy statement of government, the Medium Term Budget Policy Statement, tabled in October.

Moody's changed its credit rating outlook for South Africa's economy from stable to negative because it said it was concerned South African politicians would not be able to stick to strict fiscal policies as this could be undermined by pressure from the ANC and labour.

Manyi said political debate was "normal" in a democracy.

"The South African government will continue to prioritise higher economic growth and job creation," added Manyi.

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