Minister of Finance Pravin Gordhan delivers delivers the 2014 Budget Speech in Cape Town.

Johannesburg - South Africa’s plan to rein in spending to narrow the budget deficit over the next three years is positive for the nation’s credit outlook, Moody’s Investors Service and Fitch Ratings said.

“Spending restraint is being maintained despite less robust growth and revenue forecasts,” Kristin Lindow, senior vice president at Moody’s Investors Service in New York, said in an e-mailed response to questions today.

The budget presented by Finance Minister Pravin Gordhan yesterday “showed the government’s fiscal consolidation plans are on track,” Fitch said in a statement.

In the last budget before May 7 elections, Gordhan cut his targets for the deficit for the current fiscal year and for each of the next three years as a weaker rand boosted tax revenue and the government pledged to stick to its expenditure ceiling.

At the same time, he lowered projections for economic growth this year to 2.7 percent from 3 percent.

If global growth disappoints, the rand weakens further or inflation and interest rates “rise significantly more than anticipated, we would expect the fiscal outcome to be less favorable than projected,” Lindow said.

The government estimated that gross government debt will probably increase to 48.3 percent of gross domestic product in the year through March 2017.

Debt-service costs account for almost 10 percent of government expenditure and Lindow said this is likely to rise in line with or slightly above inflation.

“If the election results lead to a more populist strategy, we would see more reticence from foreign investors to participate as actively in the local government bond market, which would have negative consequences for the cost and availability of funding,” Lindow said.

Standard & Poor’s and Moody’s have kept South Africa’s credit rating on a negative outlook since downgrading it in 2012.

Fitch has a stable outlook on the country’s creditworthiness.

The budget doesn’t change the negative outlook on South Africa’s debt, S&P’s director of sovereign ratings, Ravi Bhatia, said by phone from London yesterday. - Bloomberg News