- S&P Global downgraded the rand’s rating to junk status on Friday
- Finance Minister Malusi Gigaba has convened a budget Lekgotla to discuss implications of downgrade
- Economists warn that government will be forced to cut expenditure
Finance Minister Malusi Gigaba has convened an urgent budget Lekgotla in the wake of yet another rating downgrade.
Standard & Poor Global (S&P) downgraded the rand’s rating to sub-investment grade on Friday. The move which was widely expected effectively means the local currency is now rated as junk.
Gigaba said the Lekgotla would look at improving revenue collection, improving inclusive economic growth and ways to limit government spending.
Briefly.co.za discovered that the Treasury is under severe pressure to raise revenue and lower expenditure as it grapples with a budget shortfall estimated to be at around R50 billion.
Economists have warned that the government would be forced to cut expenditure and show clear fiscal reforms to avoid another downgrade.
Stanlib economist Kevin Lings told Eyewitness News that ratings agencies have sent a clear message to the government about implementing serious fiscal reform.
Moody’s has placed South Africa on review but has kept the rating at one grade above junk status for the time being.
President Jacob Zuma released a statement saying he together with cabinet were committed to providing a sustainable fiscal framework for the country. Zuma instructed Gigaba to urgently identify concrete measures to stabilise the ailing economy.
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