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.
The 2018 Budget had projected that the debt-to-GDP ratio would stabilise at 56percent by 2020/21.
Bianca Botes, an analyst at Peregrine Treasury Solutions, said the rand was not impressed by the MTBPS as it did little to restore business confidence.
“With global interest rates on the rise, the government’s growing debt burden threatens to cripple the fiscus, allowing less room for expenditure on key structural economic transformation measures,” Botes said.
Observers have warned that an IMF bailout would come with stringent conditions that could include structural adjustment programmes.
Union federation Cosatu's parliamentary co-ordinator, Matthew Parks, said the conditions would lead to cuts in public spending and falling living standards.
“We note the government’s projections that debt levels will stabilise at 58percent of the GDP in three years,” Parks said.
“Yet we have heard this before. The government is not convincing in this regard. If we end up running to the IMF, it will be workers who will suffer the most and first.”
Mboweni said the country faced a bleak future as growth forecasts since the 2008 global financial crisis had undershot and state-owned companies, particularly Eskom, had choked up debt at alarming rates.
He said the main budget fiscal deficit for the current financial year had been revised up to 4.3percent of GDP, from 3.8percent forecast in the February Budget. This was expected to rise to 4.4percent in fiscal year 2019/20, before gradually declining to 4.2percent in the 2021/22 period.
Peter Montalto, head of capital markets research at Intellidex, said it was going to be difficult for the government to stabilise its debt as weak revenue and growth estimates were expected to remain weak.