A street money changer counts South African Rands in Harare, Zimbabwe, May 5, 2016. REUTERS/Philimon Bulawayo - RTX2CZDI

The S&P Global Ratings recent downgrade of the South African local currency debt as sub-investment grade subjects South Africa to being removed from the Barclays Global Aggregate index whose inclusion criteria requires investment grade rating on the state’s local currency debt from any two ratings agencies. According to analysts, such exclusion will lead to outflows of about $2 billion.

As South Africa also faced to be excluded from Citi’s World Government Bond Index (WGBI), the biggest of the global benchmarks, Moody’s Investors Service’s decision to change its rate till February next year saved the day. In comparison to $2 billion outflows from the Barclays exclusion, more than $10 billion would be lost if South Africa fell out of Citi’s WGBI.

In response to the ratings and rising pressures behind them, South African President Jacob Zuma called for stronger measures directing the Finance Minister Malusi Gigaba to finalize expenditure cuts proposals totalling 25 billion rand ($2 billion) and revenue boosting measures amounting to 15 billion rand – including through taxes.

In a statement, Moody’s senior analyst for South Africa, Zuzana Brixiova said, “The review period may not conclude until the size and the composition of the 2018 budget is known next February.”

S&P rated South Africa’s foreign currency debt as “junk,” and at the moment, Moody’s rates South Africa’s foreign and local currency debt on their lowest investment grade rung of Baa3.