MBOWENI PUTS SA’S ECONOMY FIRST, MOODY’S SECOND
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finance minister Tito Mboweni has abandoned any attempt to hang on to South Africa’s last investment-grade credit rating, with a budget that bluntly acknowledged debt will not stabilise over the next few years and unexpectedly eased the tax burden on individuals in a desperate attempt to resuscitate the flagging economy.
The decision not to raise taxes to help curb ballooning public sector debt and to narrow widening budget deficits — as had been expected — is likely to prompt Moody’s Investors Service to downgrade its investment-grade credit rating for SA, triggering large capital outflows which will raise borrowing costs in the country.
S&P and Fitch, the other rating agencies which have already slapped “junk” status on SA’s sovereign debt, are also likely to downgrade their ratings again.
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