JOHANNESBURG - Moody’s said on Friday that a weaker fiscal outlook in South Africa’s medium-term budget policy statement issued this week was a credit negative, sending the rand weaker.
“The government’s revised budget policy statement projects larger fiscal deficits and higher government debt, amid slower growth, a weaker rand and higher interest rates than expected in February, a credit negative,” Moody’s said in a research note.
Moody’s is the last of the top three agencies to still rate the country investment grade.
The rand also fell, yesterday, as Mboweni warned of a possible IMF bailout.
The rand yesterday extended its losses after Finance Minister Tito Mboweni warned that the country might be forced to go to the International Monetary Fund (IMF) for a bailout if the escalating debt was not reined in.
The local unit fell to R14.57 to the dollar by 5pm after hitting R14.50 on Wednesday after Mboweni said in his maiden Medium Term Budget Policy Statement (MTBPS) that government debt had widened far more than initially thought.
Mboweni told Parliament that the risk of approaching the Washington-based IMF for help could become more than a reality if the debt risk remained elevated.
“If debt to gross domestic product (GDP) ratio reaches 60percent, the IMF will come knocking and take over,” Mboweni said. “We want to avoid that.”
Mboweni’s warning comes after his MTBPS showed that the government debt would deteriorate from 55.1percent of GDP in 2018/19 to 57.4percent in 2020/21.