A possible downgrade of South Africa's credit rating on November 1 may already be priced into markets, but structural reforms are still needed, the country's central bank governor has told CNBC.
Moody's is the last of the three major ratings agencies to rate South African government debt at investment grade, but is expected by some to cut to sub-investment grade, colloquially known as 'junk' status, at its next review.as domestic and international pressures weigh on Africa's second-largest economy, and the World Bank recently cut the country's growth forecast sharply.
Speaking to CNBC's Geoff Cutmore at the IMF Annual Meeting in Washington D.C. on Thursday, South African Reserve Bank Governor Lesetja Kganyago said Pretoria was "alive" to the issues raised by ratings agencies. "From where we're sitting as a central bank, what we look at is we ask ourselves the question 'is a downgrade reflected in the current financial market prices?'" Kganyago said.
"If it is reflected in the current financial market prices, then a downgrade should not have such an adverse effect on the South African financial assets because it is already priced in, but if it is not priced in, we are going to see an outflow of funds from the South African bond markets."
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