On Wednesday, the rand stayed steady under the R19 mark as the markets and the economy await the financial plans Finance Minister Enoch Godongwana will announce in his Budget speech.
At 5.30am, the rand started of the day trading stronger at R18.89 against the US dollar.
The British pound and the euro also declined against the rand to trade at R23.8565 and R20.4255, respectively.
South African markets closed in the red yesterday, while the unemployment rate rose to 32.1% in Q4 2023, compared to 31.9% recorded in the previous quarter.
2024 Budget speech
Andre Cilliers, currency strategist at TreasuryONE said that government is struggling with unsustainable high debt levels that need urgent fiscal reform.
According to Cilliers, a closer look reveals debt-to-GDP ratios could potentially reach the mid-80s in the medium term, especially when the debts of state-owned enterprises (SOEs), municipalities, and upcoming redemptions are factored in.
To address these issues, a significant ideological shift will be required from the Budget speech towards the full privatisation of SOEs which could spur economic growth and increase tax revenues. Cilliers said that slashing the large public sector wage bill is also necessary.
“Furthermore, the medium-term financial outlook is threatened by a precarious tax revenue potential due to a decreasing real tax base and challenging growth prospects,” Cilliers said.
The capital markets are expected to shoulder a substantial burden, compounded by the financial strain of SOE bailouts which raises concerns of potentially exceeding deficit projections.
IOL Business