Fin24

Apartheid debt settled

2001-09-03 16:10

Johannesburg - South Africa has made the final repayment on billions of dollars of foreign debt dating back to a moratorium imposed during apartheid, improving its credit outlook, the Treasury said on Monday.

A final repayment of $6.885 billion (R56.85 billion) on the $13.6 billion deemed affected by the 1985 "debt standstill" was made by the National Treasury on August 15, it said in a statement.

"The final settlement of the debt standstill marks the end of an era and the elevation of the South African credit to new heights," it said.

Economists said the step could signal improvements to South Africa's credit outlook by rating agencies like Standard & Poor's and Moody's. Both agencies have given the country an investment-grade rating, but their outlooks differ.

South Africa's debt as a percentage of gross domestic product fell to 44.3% in the current fiscal year from 48.2% in 1997. Less than 8% of the total is foreign debt.

The Treasury said the debt standstill was imposed after political unrest in 1984 and 1985 triggered huge capital outflows and a temporary closure of foreign exchange markets.

Economists said the problem arose mainly from the fact that US banks had recalled short-term debt to South African institutions, which were then unable to repay what they owed because it had been lent onwards on a long-term basis.

Four successive interim arrangements with the government were made, with the last one taking effect on January 1, 1994.

Under this deal, an initial repayment of 10% of the outstanding debt was made in February 1994, followed by 15 half-yearly repayments which also took into account existing fixed repayment obligations.

"This meant that approximately 40 percent of the amount of outstanding debt was repaid in the first five years and the remaining 60% during the last three years of the tenor of the final arrangement," it said.