WORLDVIEW: It’s time for SA government debt to be rated as junk

For the last two years, SA has lived in fear that Moody's – the last credit rating agency to rate South African government debt a notch above junk – will drop our rating. If this happens, the cost of government borrowing will rise, probably by quite a bit. The rand will probably weaken further. And ultimately, SA will probably need to be bailed out by the IMF, in a package with a lot of attached strings.

This has been the pattern many other countries have experienced. Their debt is cut, their payments balloon, they are unable to borrow enough to finance their budgets in the market, and they are forced to turn to the IMF. The IMF is willing to ride to the rescue, but the loans and bailouts come with a lot of aggressive conditions, usually in the form of major spending cuts.

This is widely painted as a very grim scenario, and rightly so. IMF conditions are notoriously unpleasant and painful, and frequently lead to significant social unrest. It's also very hard to recover from being in the position of needing a bailout – debt markets are not famously forgiving.

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