Moody’s foresees compromise in S. Africa’s budget stalemate

Ratings agency Moody’s anticipates that South Africa’s coalition government will reach a compromise to approve the country’s deadlocked budget while maintaining its fiscal consolidation goals.

In a report dated March 17, the ratings agency stated, “Our baseline is for the GNU (Government of National Unity coalition) to reach a compromise, leading to an orderly approval of the budget,” However, it acknowledged that “continued friction” within the coalition could result in some adjustments before parliamentary approval, though the overall fiscal consolidation strategy is expected to remain intact.

The budget faced delays last month due to disagreements over a controversial proposal to increase value-added tax (VAT). Despite Finance Minister Enoch Godongwana presenting a revised version last week that scaled back the VAT hike, major political parties continue to oppose it, leading to ongoing negotiations.

Moody’s also noted that the revised budget aims for public debt to peak in the upcoming fiscal year starting April 1, a target the agency expects to remain unchanged in the final approved version.

Attribution: Reuters

Subediting: Y.Yasser