Rand slumps as MTBPS reflects more of the same
DURBAN – The rand came under pressure as in line with market expectations as Finance Minister Tito Mboweni laid the foundation for the financial future for South Africa.
The rand was largely weaker on the day with a 5pm bid of R16.39 to the dollar, 26c weaker than Tuesday’s 5pm bid. Against the pound the domestic unit was 21c weaker at R21.26 and 14c weaker against the euro at R19.22.
Earlier today, Mboweni delivered the Medium-term Budget Policy Statement (MTBS), which which communicates the policy goals of government, provides a macroeconomic context and the context in which the annual budget speech in February will be presented.
Bianca Botes, executive director at Peregrine Treasury Solutions said with government debt remaining elevated and economic growth remaining subdued, the market demonstrated scepticism of the minister’s optimism and the green shoots he is witnessing in the economy.
“While some good news about sourcing electricity supply from suppliers other than Eskom was reiterated, the R10.5 billion allocation to SAA to implement its business rescue plan is frowned upon.
“While there is commitment from Treasury to ensure economic growth, bolster employment and enhance the ease of doing business with South Africa, a concrete plan of action still needs to be provided and successfully implemented,” she said.
She said the government debt remained a concern, expecting to reach R5.5 trillion in 2023/2024.
Mboweni said the revised fiscal framework put the country on a course to stabilise the ratio of debt-to-GDP at around 95 per cent within the next five years.
“The medium-term fiscal strategy narrows the main budget primary deficit from an expected R266 billion in 2021/22 to R84 billion in 2023/24 and we achieve a surplus by 2025/26.
“We propose consolidated spending of R6.2 trillion over the 2021 Medium Term Expenditure Framework, of which R1.2 trillion goes to learning and culture, R978 billion to social development and R724 billion to health,” he said.
The Minister forecast that the economy would grow by 3.3 per cent in 2021.
Nancy Hossack, an analyst at Foord Asset Management said of all the sources of financial stress, rand volatility was surely topmost for South African investors. “As a nation, we obsess about the rand and its trajectory.”
The rand responded negatively to the address, weakening to R16.50/$ before rebounding to the high R16.30s as the market continues to focus more on global events and sentiment than local factors.
BUSINESS REPORT ONLINE