The ratings on South Africa reflect the sovereign's prudent macroeconomic policies, a moderate debt burden, and political stability, balanced by severe structural economic weaknesses and still modest (albeit improving) external indicators. South Africa's fiscal policies are underpinned by budgetary and administrative reforms that have improved fiscal flexibility. This has enabled the government to conduct more expansionary policies and allocate increased resources to social expenditure, without reversing the downward trend in the public debt burden. The external debt burden is manageable and decreasing, estimated at 20.5% of GDP in 2004. A further supporting factor is the independence of the central bank, the South African Reserve Bank (SARB), which has demonstrated its commitment to low inflation. South Africa also enjoys well-developed domestic
