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The rand experienced some volatility on Wednesday afternoon when the finance minister presented his medium-term budget policy statement to Parliament.
The local currency had started the day at R16.20 / $ but closed around 0.8% weaker at R16.34 / $, having previously surpassed R16.50 / $.
“The rand responded negatively to the leadership […] before rebounding to R16.30 as the market continues to focus more on global events and sentiment than local factors, “explained Bianca Botes, CEO of Peregrine Treasury Solutions.
In his speech, Mboweni said that the debt-to-GDP ratio was expected to increase in the next few years, and that government debt is expected to reach 5.5 trillion rand in 2023/24.
Botes said that while there have been some encouraging commitments from the Treasury to ensure economic growth, a concrete action plan is still required, as well as its implementation.
“With government debt remaining high and economic growth moderate, the market was skeptical of the optimism of the minister and the green shoots he is witnessing in the economy,” Botes said.
‘Stating the obvious’
Mboweni allocated R10.5 billion to troubled state airline South African Airways to implement its rescue plan, adding up to R16.4 billion that the Treasury Department previously set aside for three years for SAA to repay its guaranteed debt and cover costs. debt service. .
“While good news about supplying electricity to providers other than Eskom was reiterated, the allocation of R10.5 billion to SAA is frowned upon,” Botes said.
Andre Botha, Senior Distributor for TreasuryONE, said the medium-term budget “had no surprises, it just stated the obvious that we will finance our economy with even more debt and that we must be fiscally prudent. If this can be implemented, it is another story.”
He added that while the MTBPS caused some volatility for the local currency, most of the news was traded in the currency.
“The rest of the emerging market currencies are also on the defensive today, as the US dollar raises today. [dollar] is at the forefront as the US elections become increasingly focused. “
