Fitch Lifts South Africa's Rating for the First Time in About Two Decades

Fitch Ratings raised South Africa's long-term sovereign credit rating to BB from BB-, its first upgrade of the country in more than two decades, Africanews reported. The agency cited stronger fiscal discipline and debt that has come in lower than it expected when it cut the rating in 2020.

The detail behind the decision is what makes it notable. Fitch said South Africa has run primary budget surpluses averaging about 1 percent of output over the past four years and that government debt is expected to stabilize near 80 percent of gross domestic product over the next two years. A primary surplus means the government takes in more than it spends before counting interest costs, which is the discipline that slows the growth of debt. The agency noted that the rating remains constrained by high inequality and a heavy interest burden, but supported by long debt maturities and borrowing concentrated in the local currency.

The move follows Moody's decision last month to shift its outlook on South Africa to positive, leaving all three major agencies with the country two steps below investment grade. That alignment matters for borrowing costs, because a higher rating can lower the interest a government pays and widen the pool of investors permitted to hold its bonds.

The upgrade stands out precisely because it rewards restraint rather than stimulus. At a time when many governments are expanding spending and relying on central banks to finance it, an emerging economy earned a better grade by maintaining its primary balance, a reminder that credible budgets, not credit expansion, are what ultimately lower the cost of money.