Has Gordhan done enough to stave off credit ratings downgrade?

Agencies have warned that SA could find itself labelled as junk status if it doesn't curb expenditure & kickstart economic growth.

Finance Minister Pravin Gordhan delivers his 2017 Budget Speech in Parliament. Picture: GCIS.

CAPE TOWN - Whether Finance Minister Pravin Gordhan has done enough to stave off a credit ratings downgrade this year with his intention to stabilise South Africa's debt, which currently stands at R2.2 trillion, remains to be seen.

Agencies have warned that South Africa could find itself labelled as junk status, if it does not curb expenditure and kickstart economic growth, it could.

In his budget speech on Wednesday, Gordhan said a moderate improvement of 1.3% growth in GDP is expected for the 2017/2018 financial year.

Although an expenditure ceiling has been imposed, Gordhan noted that the country's debt service costs are amounting to R162.4 billion.

Global Credit Ratings CEO Marc Joffe says, “Emphasis was placed on initiatives and rationalising government’s wage bill, reductions with regards to public entities and streamlining procurement processes. With any overspend the potential risk to the sovereign rating and that shortfall will have to be funded through additional debt.”

KPMG Economist Lullu Krugel says Gordhan has not placed enough emphasis on growth.

“I’m worried about what rating agencies will think about this. I don’t think it will satisfy their requirements of seeing a rapidly growing South African economy over the next couple of years.

(Edited by Shimoney Regter)