Moody’s expects South Africa’s coalition government to reach a budget compromise, maintaining fiscal consolidation. The budget faced delays due to VAT disputes, and negotiations are ongoing. Moody’s predicts the final budget will still target public debt stabilization.
Moody’s anticipates that South Africa’s coalition government will successfully negotiate a compromise regarding the country’s stalled budget, ensuring that the primary goal of fiscal consolidation remains. In an issuer comment dated March 17, Moody’s stated, “Our baseline is for the GNU (Government of National Unity coalition) to reach a compromise, leading to an orderly approval of the budget.” While ongoing conflicts within the coalition may necessitate adjustments to fiscal measures, the overarching focus on fiscal consolidation is expected to be retained.
The budget faced delays last month due to disputes among ruling coalition members concerning a controversial proposal to increase value-added tax (VAT). Following these disagreements, Finance Minister Enoch Godongwana presented a revised budget last week. However, a majority of significant parliamentary parties have publicly rejected this amended proposal, despite efforts to reduce the VAT hike. Negotiations are currently underway to resolve these conflicts.
The revised budget is designed to ensure that public debt peaks in the upcoming fiscal year starting April 1. Moody’s forecasts that this objective will still be reflected in the final budget approved by parliament, contributing to the overall strategy of fiscal responsibility.
In conclusion, Moody’s projects a constructive resolution among South Africa’s coalition government regarding the national budget, emphasizing fiscal consolidation. Despite existing tensions and prior delays linked to VAT proposals, there is optimism regarding an eventual compromise that aligns with fiscal objectives. The anticipated budget revisions aim to stabilize public debt as part of the country’s financial strategy.
Original Source: money.usnews.com
