Moody’s Predicts Compromise in South Africa’s Coalition Budget Negotiations

Moody’s predicts that South Africa’s coalition government will achieve a compromise on the budget, maintaining a focus on fiscal consolidation. Despite existing tensions, the agency expects the revised budget’s core elements, including public debt targets, to persist as negotiations to resolve disagreements proceed.

Moody’s has indicated that South Africa’s coalition government is likely to reach a compromise that will ensure the passage of the country’s budget, maintaining a focus on fiscal consolidation. In their commentary dated March 17, Moody’s stated, “Our baseline is for the GNU (Government of National Unity coalition) to reach a compromise, leading to an orderly approval of the budget.”
Despite ongoing tensions within the coalition, changes to fiscal measures may occur prior to parliamentary approval; however, the central aim of fiscal consolidation is expected to endure.
Last month, the budget encountered delays due to disagreements among ruling coalition members regarding plans to increase value-added tax (VAT). Following these conflicts, Finance Minister Enoch Godongwana introduced a revised budget in parliament.
The amended budget faced widespread rejection from major political parties, despite its reduced VAT hike proposal, as negotiations continue to resolve the deadlock. The revised budget anticipates public debt reaching its peak in the fiscal year starting April 1, a target that Moody’s expects will remain in the finalized budget.

In conclusion, Moody’s anticipates that South Africa’s coalition government will reach a necessary compromise to successfully pass the budget while focusing on fiscal consolidation. Although tensions persist within the coalition and certain fiscal measures may be modified, the overall objectives of the budget are expected to remain consistent. The timely resolution of disputes is vital for the country’s economic stability as it approaches the new fiscal year.

Original Source: money.usnews.com