Moody’s anticipates a compromise within South Africa’s coalition government, allowing the budget to pass with a focus on fiscal consolidation. Despite some friction over proposed VAT increases, they believe key fiscal targets, such as public debt management, will likely be maintained in the approved budget.
Moody’s predicts that South Africa’s coalition government will ultimately achieve a compromise facilitating the passage of its budget while maintaining a focus on fiscal consolidation. The agency noted in a comment dated March 17 that they expect the Government of National Unity (GNU) to negotiate effectively for an orderly budget approval.
Despite ongoing tensions within the GNU, Moody’s anticipates that any amendments to fiscal measures prior to parliamentary approval will not detract from the overarching aim of fiscal consolidation in the budget. Last month, budget discussions faltered due to disagreements concerning a proposal to increase value-added tax (VAT), prompting Finance Minister Enoch Godongwana to present a revised plan recently in parliament.
The revised budget attempts to limit the scale of the VAT increase, yet many major parliamentary parties have publicly opposed it. Currently, negotiations are underway to resolve the stalemate. Moody’s highlighted that the goal of peaking public debt in the upcoming fiscal year starting April 1 will likely remain intact in the final budget approved by parliament.
In summary, Moody’s assessment signals optimism regarding South Africa’s coalition government reaching a budget compromise that emphasizes fiscal consolidation. Despite the challenges posed by internal disagreements over the VAT increase, the main financial goals remain clear. The ongoing negotiations are critical in overcoming the current impasse to secure the proposed fiscal strategies before parliamentary approval.
Original Source: money.usnews.com
