JOHANNESBURG (Reuters) – Ratings agency Moody’s expects South Africa’s coalition government to reach a compromise that allows the country’s deadlocked budget to pass with its focus on fiscal consolidation intact.
“Our baseline is for the GNU (Government of National Unity coalition) to reach a compromise, leading to an orderly approval of the budget,” Moody’s said in an issuer comment dated March 17.
“Continued friction within the GNU means there may still be some changes to fiscal measures before parliament approves the budget, but we expect the budget’s overall focus on fiscal consolidation to remain.”
The budget was postponed last month because of disagreements in the ruling coalition over a contentious plan to raise value-added tax (VAT), before Finance Minister Enoch Godongwana presented a revised version in parliament last week.
Most big parliamentary parties publicly rejected the amended budget, despite it scaling back the size of the proposed VAT hike, and negotiations are taking place to try to break the impasse.
The revised budget aimed for public debt to peak in the fiscal year that starts on April 1, a target Moody’s predicted would remain in place in the version eventually passed by parliament.
(Reporting by Alexander Winning. Editing by Mark Potter)
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