JOHANNESBURG – South Africa would try to absorb the extra Eskom costs with new revenue or expenditure measures in the next mid-year budget exercise, with departmental budget cuts being one option, Moody’s Investors Service said on Thursday.
“In any event, Moody’s sees the government’s room to manoeuvre as extremely constrained,” the ratings agency said.
Moody’s, the only remaining rating agency that still has the country’s sovereign debt above junk, has in recent months displayed its ire over the government’s inability to rein in debt, particularly with regard to Eskom.
It said on the spending side, the government had already embedded in its original budget several containment measures, including related to the wage bill, making further restraint difficult.
The 2019 budget had raised contingency reserves to R13 billion for fiscal 2019 and lowered those for fiscal 2020 to R6bn to accommodate financial support requests from the broader state-owned enterprises, including South African Airways and Denel, leaving limited room to absorb Eskom’s additional support.