JOHANNESBURG – The spectre of a ratings downgrade of South Africa to junk status by Moody’s Investors Services loomed even larger yesterday, after the markets were left uninspired by Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS).
Mboweni’s candid portrait of the economy sent the rand hurtling against the dollar. It breached the key R15 to the dollar mark, sliding a whopping 39c to R15 by 5pm, compared to the same time on Tuesday.
The rand lost 1.5 percent against the dollar as Mboweni compared South Africa to a winter season, where the ground was dry, emphasising debt is accelerating at an unsustainable pace and the economic landscape is dismal.
Moody’s, the only ratings agency that still has South Africa’s credit rating above junk, is due tomorrow.
Economists and analysts said yesterday that while Mboweni’s openness about the problems faced by the economy and his consequent suggestions on cost savings of R50 billion a year for the next three years were commendable, there were no concrete answers on fixing the medium-term position, which was worse than had been anticipated. “The fiscal position has worsened significantly since February, a fact that Moody’s will frown upon,” said Peregrine Treasury Solutions in its commentary.