The ratings on the Republic of South Africa are supported by its prudent macroeconomic policies, a moderate debt burden, and strong and stable political institutions. These are balanced by relatively vulnerable external finances because of a continued high reliance on portfolio inflows and severe structural socioeconomic weaknesses, including income disparities, poverty, high unemployment, and the unfolding HIV/AIDS pandemic. Rising inflationary pressures in the context of strong domestic demand, rapid credit growth, and large exchange rate movements due to periodical turbulences in emerging markets have increasingly challenged South Africa's economic policies over the past year. In response, the South African Reserve Bank (SARB) has pursued tighter monetary policies and the National Treasury tabled a surplus budget for fiscal year 2007/2008 (ending
