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Moody's decision to change the country's credit outlook from stable to negative has "revived" conversations about the possibility of SA seeking a bailout from the International Monetary Fund, said Business Unity South Africa's President Sipho Pityana.
The country's apex business organisation on Saturday issued a statement in reaction to the latest decision by ratings agency Moody's to downgrade the credit outlook from stable to negative. Moody's has kept the credit rating at Baa3, the last rung of investment grade, Fin24 reported.
While Finance Minister Tito Mboweni has called on South Africans to work together to avoid the downgrade, Pityana has said that there has been resistance by key stakeholders which limits government's ability to "adopt and implement" structural reforms.
"We need to cut through the grandstanding and posturing, make the necessary compromises, and deal with these issues once and for all. Otherwise we may not have an economy to talk about," Pityana said.
According to the medium-term budget policy statement tabled by Mboweni in Parliament this week, government's debt-to-GDP ratio is currently 61% and will grow to above 71% of GDP by 2022.
"Moody's has rightly pointed out that government has to get its house in order, and if it doesn't, our investment rating will be cut to junk. And we all know what that means: our economy will slide even further, we will no longer be able to borrow ourselves out of debt, and the entire economic system starts to unravel.
"This development also, unfortunately, revives the conversation about the possibility of a bailout from an entity like the IMF – and punishing austerity measures, which we have warned about in the past, that would have drastic consequences on our nation," Pityana said.
Leadership
Pityana said that tough political decisions will need to be taken to stop the deterioration of public finances. This includes curbing public expenditure and "stopping the bleeding" at state-owned enterprises.
"Between now and the Budget statement next February, we will have to see clear leadership from President Cyril Ramaphosa in dealing with the economic fundamentals. This is the biggest priority he faces now and will have to rise to the occasion," he said.
