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 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 impact of HIV/AIDS. Rising inflationary pressures in the context of strong domestic demand, rapid credit growth, and large exchange rate movements due to periodical turbulence in emerging markets have increasingly challenged South Africa's economic policies in recent years. In response, the South African Reserve Bank (SARB) has pursued tighter monetary policies throughout 2006 and 2007. The National Treasury is also targeting a surplus budget for 2007/2008
