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Rand strengthening depends on cost cutting budget

Economists only expect the rand to strengthen further if the finance minister delivers a cost-cutting budget.

FILE: Wits University academic Lumkile Mondi says he expects some movement after the budget speech. Picture: Supplied.

JOHANNESBURG - Some economists say they only expect the rand to strengthen further if Finance Minister Pravin Gordhan delivers a budget that is focused on cost-cutting.

The local currency regained some ground last week after the South African Reserve Bank announced the repo rate would increase by 50 basis points, to curb inflation.

Wits University academic Lumkile Mondi says he expects some movement after the budget speech.

"We expect the rand to weaken a bit unless the minister comes to the party and supports the programme by cutting on expenditure."

FNB economist Sizwe Nxedlana says, "The latest repo rate increase has been taken well by the market to the extent that over the next couple of weeks we see a credibility in enhancing budgets coming through from the finance minister."

INTEREST RATES INCREASE TO 6.75%

Reserve Bank governor Lesetja Kganyago last week announced the bank would increase the repo rate by 50 basis points.

This means the repo rate, which is the rate at which the Sarb lends money to banks, will rise to 6.75%.

The prime lending rate, the figure charged by banks to customers, will increase to 10.25%.