JOHANNESBURG/LONDON: Moody’s left South Africa on the brink of “junk” status on Friday after it revised the outlook on the country’s last investment-grade credit rating to “negative,” piling pressure on President Cyril Ramaphosa to quicken the pace of reform.
Moody’s said the outlook revision on its ‘Baa3’ rating, the lowest rung of investment grade, was motivated by a deterioration in the economic growth outlook and rising debt.
Analysts had expected the move after a bleak mid-term budget statement this week that slashed this year’s growth forecast to 0.5 percent and showed government debt racing to more than 70 percent of gross domestic product by 2023.
The rand tumbled more than 2.5 percent over the past week against the dollar, its sharpest weekly drop since early August. Yields on local 10-year government bond issues traded on Monday at just over 8 percent but climbed as high as 8.6 percent following the dire budget predictions.
The negative outlook means there is a window of 12-18 months in which a downgrade could be delivered, but it could come sooner if Moody’s isn’t impressed by the fiscal picture presented at the next budget statement in February.
“The development of a credible fiscal strategy to contain the rise in debt, including in the 2020 budget process and statement, will be crucial to sustain the rating at its current level,” Moody’s said in a statement after South African financial markets had closed.
It added that its new outlook reflected rising concern that the government would not find “the political capital to implement the range of measures it intends, and that its plans will be largely ineffective in lifting growth.”
The finance ministry responded by saying the country had “a narrow window to demonstrate faster and concrete implementation of reforms.”
Ramaphosa has struggled to revive Africa’s most advanced economy since taking over from scandal-plagued Jacob Zuma in February 2018.
The wave of optimism among foreign and local investors that accompanied his rise to power has fizzled out as the economic challenges have grown more acute, with unemployment reaching an 11-year high above 29 percent and state power company Eskom struggling to keep the lights on.
One of the greatest worries is rising government debt, which shows no signs of stabilizing soon amid repeated bailouts for state-owned companies.
Fund managers said they were not expecting a steep sell-off in government bonds and the rand when financial markets re-open on Monday, because the outlook revision was expected by so many and South African assets had fallen sharply over the past week.
The spread of South African dollar debt over US Treasuries is already wider than on some junk-rated sovereigns, reflecting longstanding concerns over the country’s fiscal health.
“Valuations are already reflecting this outcome. So, on any sell-offs, we would see it as a buying opportunity,” said Jean-Charles Sambor, deputy head of emerging market fixed income at BNP Paribas Asset Management.
S&P Global and Fitch already moved South Africa’s debt to sub-investment level in 2017, when the country was embroiled in corruption scandals under Zuma.
A move to “junk status” from all three agencies typically increases a government’s cost of borrowing by raising the premium that investors demand to hold its debt. It could also see South Africa evicted from the benchmark World Government Bond Index of local-currency debt, which could trigger billions of dollars of passive outflows.
Phoenix Kalen, director of emerging markets strategy at Societe Generale, said South Africa was now in the “last-chance saloon” and that it had to stabilize its debt.
“This will be a Herculean task,” Kalen said, citing financial pressures at state companies among causes for concern.
Ramaphosa’s government has promised Eskom 230 billion rand ($15.3 billion) of bailouts over the next decade, on top of a 59 billion rand “special appropriation” over the next two fiscal years. But analysts say it will need more state money than that.
Kevin Lings, chief economist at asset manager Stanlib, said a downgrade in 2020 was now his “base case” and that some investors would be reluctant to buy South African debt until the downgrade had happened.
“Next year is going to be marked by consistent uncertainty around the currency and bond markets, it’s going to put South Africa under a lot of strain,” he said.
Moody’s leaves South Africa teetering on brink of ‘junk’
Moody’s leaves South Africa teetering on brink of ‘junk’
- Moody’s said the outlook revision on its ‘Baa3’ rating, the lowest rung of investment grade, was motivated by a deterioration in the economic growth outlook and rising debt
Man arrested after Denmark’s Billund Airport evacuated over bomb threat
- Investigations into the incident are continuing, the police said
COPENHAGEN: A man was arrested in Denmark on Saturday in connection with a bomb threat at Billund Airport, the country’s second largest aviation hub, police said in a statement.
The airport, in central western Denmark, was evacuated and remains shut following the threat.
“The evacuation has proceeded calmly and as expected, with travelers following our instructions,” police inspector Michael Weiss said in a statement.
Investigations into the incident are continuing, the police said, adding it was not clear when the airport would reopen.
Palestinians to reconsider US ties after veto of bid for full UN membership, Abbas says
- Washington vetoed a Palestinian request for full United Nations membership
CAIRO: The Palestinian Authority will reconsider bilateral relations with the US after Washington vetoed a Palestinian request for full United Nations membership, President Mahmoud Abbas said in an interview with the official WAFA news agency.
Indonesia on highest alert as Sulawesi volcano continues to erupt
- Over 7,500 people living near the volcano have so far been evacuated
- Volcanic activity is common in Indonesia, which lies on the Pacific ‘Ring of Fire’
JAKARTA: Indonesian authorities were on the highest alert on Saturday as a volcano in North Sulawesi continued to erupt. Thousands living nearby have been forced to leave their homes.
Mount Ruang, located on the northern side of Sulawesi Island, had at least eight eruptions since April 16, including a major one on Wednesday evening, which prompted Indonesia’s volcanology agency to issue its highest alert, which indicates an active eruption.
The center recorded at least two eruptions on Saturday, with the crater emitting white-gray smoke more than 1,200 meters above its peak after midnight, followed by another eruption at noon that released an ash column of about 250 meters.
“Based on visual observations, as of April 20, 2024, at 12:15 p.m., there is still high volcanic activity in Mt. Ruang,” Muhammad Wafid, head of the geology department at the Ministry of Energy and Mineral Resources, said in a statement.
“The potential danger is an explosive eruption that may cause the mountain to spew volcanic rocks in different directions, followed by clouds, as well as effusive eruption, or lava flow.”
With authorities having established a six-kilometer exclusion zone around the volcano, around 7,500 people have so far been evacuated, including more than 1,500 residents who live on the smaller island where Mount Ruang stands, and around 6,000 people living on neighboring Tagulandang island, northeast of the volcano, according to the latest data from Indonesia’s National Disaster Mitigation Agency. Thousands more are still at risk.
The international airport in Manado city, less than 100 kilometers away from Mount Ruang, is closed until at least Sunday because of volcanic ash.
“There are still concerns, because tremors and volcanic earthquakes are still being recorded by our devices, indicating magmatic fluid supply is still moving from the depth to the surface,” Hendra Gunawan, who heads Indonesia’s volcanology agency, told Arab News.
“There’s still potential for more eruptions … And a tsunami may occur if there is a large flow of volcanic material into the sea.”
Indonesia, a vast archipelago nation, has around 120 active volcanoes. The country experiences frequent seismic and volcanic activity due to its location on the arc of volcanoes and fault lines in the Pacific Basin known as the “Ring of Fire.”
Moscow says 50 Ukrainian drones shot down as attacks spark fires at Russian power stations
- Fifty drones were shot down by air defenses over eight Russian regions, including 26 over the country’s western Belgorod region
- Russia’s Defense Ministry said that it had shot down a Ukrainian Sukhoi Su-25 fighter jet
KYIV: Ukraine launched a barrage of drones across Russia overnight, the Defense Ministry in Moscow said Saturday, in attacks that appeared to target the country’s energy infrastructure.
Fifty drones were shot down by air defenses over eight Russian regions, including 26 over the country’s western Belgorod region close to the Ukrainian border. Two people — a woman with a broken leg and the man caring for her — died during the overnight barrage, after explosions sparked a blaze that set their home alight, Belgorod Gov. Vyacheslav Gladkov wrote on social media. A pregnant woman and her unborn child were also killed in shelling later Saturday, he said.
Drones were also reportedly destroyed over the Bryansk, Kursk, Tula, Smolensk, Ryazan, Kaluga regions across Russia’s west and south, as well as in the Moscow region.
Russia’s Defense Ministry said that it had shot down a Ukrainian Sukhoi Su-25 fighter jet. It provided no details and the claims could not be independently verified.
Ukrainian officials normally decline to comment about attacks on Russian soil. However, many of the drone strikes appeared to be directed toward Russia’s energy infrastructure.
The head of the Kaluga region, Vladislav Shapsha, said Saturday that a drone strike had sparked a blaze at an electrical substation, while Bryansk Gov. Alexander Bogomaz and Smolensk Gov. Vasily Anokhin also reported fires at fuel and energy complexes.
In recent months, Russian refineries and oil terminals have become priority targets of Ukrainian drone attacks, part of stepped-up assaults on Russian territory.
Ukrainian drone developers have been extending the weapons’ range for months, as Kyiv attempts to compensate for its battlefield disadvantage in weapons and troops. The unmanned aerial vehicles are also an affordable option while Ukraine waits for more US military aid.
Moscow also said Friday evening that an American citizen known to have fought with Kremlin-backed separatists in Ukraine between 2014 and 2017 had died in the Russian-occupied Donetsk region.
Russell Bentley, 64, was no longer involved in military operations and previously worked for state-owned Russian news agency Sputnik. His death was confirmed by his former battalion and by Margarita Simonyan, head of the state-funded television channel RT, who described him as “a real American.” He used the call-sign “Texas” and had spent time in prison on charges of drug smuggling before leaving the United States.
No information has been released as to the cause of Bentley’s death, but local police had previously reported the American as missing on April 8.
Meanwhile, Russia attacked Ukraine overnight with seven missiles, and air defenses downed two missiles and three reconnaissance drones, the Ukrainian air force said Saturday.
Gov. Oleh Kiper, head of Ukraine’s Odesa region, said that ballistic missiles had damaged infrastructure overnight, but did not provide further details. Previous attacks on the Black Sea city on Friday damaged port infrastructure, including two food export terminals, Ukrainian President Volodymyr Zelensky said.
Russian shelling also killed two men, including an 81-year-old pensioner in the city of Vovchansk, said Gov. Oleh Syniehubov, head of Ukraine’s Kharkiv region.
A 60-year-old woman was also injured after shelling struck a nine-story apartment block, he said.
Police say attack on Japanese nationals in Karachi can be a case of ‘mistaken identity’
- In the past, Baloch separatists have claimed responsibility for attacks on Chinese nationals in the Pakistani port city
- However, Friday’s suicide attack on a van was the first incident in Pakistan that appeared to target Japanese nationals
KARACHI: The suicide attack on Japanese nationals in Pakistan’s southern city of Karachi could be a case of “mistaken identity” as no group has claimed responsibility for it, a senior police officer said on Saturday.
The Japanese nationals were traveling on Friday in a Hiace van to an industrial area, where they worked at Pak Suzuki Motors, when the suicide bomber detonated his explosive-laden vest near the van, according to police.
A police team escorting the vehicle returned fire after coming under attack, killing an accomplice of the suicide bomber. Officials said one of the attackers was identified as Sohail Ahmed, a resident of Panjgur district in the southwestern Balochistan province.
However, Ghulam Nabi Memon, the provincial police chief, said no militant group had accepted responsibility for the attack and it seemed they didn’t intend to attack the Japanese.
“For now, it seems to us to be a case of mistaken identity,” Memon told Arab News. “We are reviewing security protocols. The police and intelligence agencies are making efforts [to arrest the perpetrators].”
In the past, Baloch separatists have claimed responsibility for attacks on Chinese nationals in the Pakistani port city. However, this is the first time that the Japanese have come under such an attack.
A police officer, who spoke on the condition of anonymity, told Arab News that police suspected the attack was carried out by the outlawed Balochistan Liberation Army (BLA). The group has claimed several attacks, including the ones on the Chinese consulate in Karachi, Karachi Stock Exchange, and a suicide attack on Chinese teachers at Karachi University.
A BLA spokesperson didn’t respond to Arab News request for a comment on the attack.
Hours after the attack, Baloch activists shared videos on X, claiming raids were conducted on the homes of their supporters in Karachi.
A police officer, who requested anonymity, confirmed that raids were made to arrest the perpetrators and facilitators of the incident, but declined to share if any arrests were made.
“All I can share is that we are going in the right direction and an important breakthrough will be made soon,” he said.
On Friday, a police handout said the provincial police chief had chaired a high-level meeting, wherein he emphasized the need to establish a dedicated unit for the protection of Chinese nationals.
The police chief also stressed strict implementation of the standard operation procedures (SOPs) regarding the security of foreign delegates and regular issuance of security adviseries by authorities.
“Further discussions centered on enhancing security measures for all Chinese residents, experts, staff, and other foreign guests/delegates in Sindh,” the handout read.
In recent weeks, militants have targeted Chinese nationals working in Pakistan on projects relating to the China-Pakistan Economic Corridor (CPEC), a major segment of Beijing’s Belt and Road infrastructure initiative, which will connect China to the Arabian Sea and help Islamabad expand and modernize its economy through a network of roads, railways, pipelines and ports in Pakistan.
In March, five Chinese nationals and their Pakistani driver were killed in northwest Pakistan, when a suicide bomber rammed his explosive-laden car into the bus carrying them to Dasu Dam, the biggest hydropower project in Pakistan, where they worked.
