South Africa Junk-Rating Risk Surges on Gordhan Fraud Charge
- Probability of central bank tightening policy increased
- Gordhan is scheduled to table mid-term budget on Oct. 26
S. Africa Credit Downgrade If Gordhan Removed: Nomura
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Fraud charges against South African Finance Minister Pravin Gordhan have moved the country a step closer to a junk rating and put the possibility of an increase in borrowing costs back on the table, investors said.
Gordhan was summonsed on Tuesday to appear in court on Nov. 2, a month before S&P Global Ratings is due to release the review of its assessment on South Africa’s credit, which is at one level above junk. The cost of insuring against non-payment of debt for five years using credit-default swaps rose to the highest since July after the news, the rand weakened the most since June against the dollar and forward-rate agreements, used to speculate on borrowing costs, surged.