The rand lost about 26c to the dollar during the course of Wednesday’s medium-term budget policy statement (MTBPS)‚ with markets processing news from Finance Minister Malusi Gigaba that the budget deficit would grow to 4.3% of GDP — well above the 3.1% target set in February.
Gigaba said spending would be R3.9bn higher than expected‚ and revenue would fall short of February’s target by R50.8bn.
After trading at about R13.75 to the dollar shortly before the speech‚ the local unit initially lost about 10c during a brief disruption of proceedings by EFF MPs.
As Gigaba continued speaking‚ the local unit hit an intraday worst level of R13.9941 — the lowest level since December 26 2016.
The breach in the expenditure ceiling was largely due to the bail-out of embattled state-owned enterprises‚ including South African Airways (SAA) and the South African Post Office (Sapo). An additional R13.7bn will be transferred in the 2017-18 financial year‚ with SAA getting R10bn and Sapo R3.7bn.
Local markets have been moving sideways for some time in anticipation of the medium-term budget‚ which was being closely watched as ratings agencies consider SA’s creditworthiness.
Analysts said markets had already significantly priced in a disappointing budget.
The rand was on the back foot against all major global currencies‚ but lost the most against sterling.
The pound was bolstered earlier by the UK’s better-than-expected GDP numbers for the third quarter.
At 2.45pm‚ the rand had weakened to R13.9856 to the dollar from Tuesday’s R13.741‚ R16.4673 to the euro from R16.1931‚ and R18.526 to the pound from R18.0777.
- BusinessLIVE
Just R20 for the first month. Support independent journalism by subscribing to our digital news package. 