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JOHANNESBURG - The rand dropped to a 10-month low yesterday after Finance Minister Malusi Gigaba flagged weaker growth expectations and rising government debt in his budget speech. Stocks were firmer.

At 5.34pm, the rand traded at R14.0250 to the dollar, 1.8percent weaker than its close on Wednesday, and at its weakest level since December27.

The sell-off came after Gigaba said in his medium-term policy statement that the budget deficit was likely to reach 4.3percent of gross domestic product (GDP) in the 2017/18 fiscal year, the highest since 2009. The Treasury’s earlier estimate for the fiscal year was 3.1percent, but the country’s first recession in eight years has hurt revenue collection, while financial difficulties at state-owned firms have weighed on sentiment.

“Markets have taken the budget speech badly, there are a lot of negatives in there,” said TreasuryOne currency dealer, Wichard Cilliers. In fixed income, bonds weakened with the yield for the benchmark government bond rising 27.5 basis points to 9.13percent. On the stock market, the benchmark JSE Top40 index was up 0.5percent at 51857.61 points, while the broader all share index rose 0.4percent to 58123.13 points.

British American Tobacco was the best performing blue chip, rising 3.48percent to R904. Telkom declined 3.3percent to a 19-month low shortly after Gigaba announced the government would sell a portion of its shares in the company. The state holds a stake of around 39percent in Telkom.

Telkom shares recovered in subsequent trading to end the day 0.55percent lower at R54.61, down 0.6percent on Wednesday’s close.