Finance Minister Pravin Gordhan on Wednesday unveiled a budget he said should lay the foundation for structural reforms necessary to grow the South African economy and bring about the implementation of the National Development Plan (NDP).
Gordhan’s budget described the NDP as a framework for “economic and social development”.
As expected, he cut his growth forecasts for this year to 2.7 percent from last year’s expectation of 3.5 percent.
Gordhan also kept to his underlying theme from last October’s mini-budget, when he took a hard-line stance on wasteful expenditure.
In a message that would be warmly welcome by credit rating agencies, Gordhan told parliament that the deficit for the current fiscal year, which ends next month, will come in better-than-expected at only 4 percent, compared with a projection of 4.2 percent in October.
Looking ahead, he forecast the deficit to fall below the benchmark 3 percent to 2.8 percent by 2016/17 – lower than the October projection of 3 percent that year. With an election looming ahead on May 7, Gordhan also announced that to compensate for inflation, personal income tax brackets and rebates will be adjusted to provide income tax relief to households worth R9.3 billion.
Initially, the budget should be broadly positive for the rand, which traded around R10.70 against the U.S. dollar ahead of Gordhan’s speech. Earlier this year it slid below R11 as the took a hit along with other emerging market currencies on concerns about the drawing down of stimulus money by the U.S. Federal Reserve.