Rand firms as South Africa’s crucial budget statement looms

Johannesburg – The South African rand strengthened slightly against the US dollar on Friday as the greenback weakened, with investors turning their attention to next week’s Medium-Term Budget Policy Statement for clues about the country’s fiscal outlook and credit-rating prospects.

According to Reuters, the rand was trading at R16.4450 to the dollar at 07:12 GMT on Friday, 16 October, about 0.3% stronger than its previous close.

The dollar index, which measures the US currency against six major currencies, was down about 0.2%, putting it on track for its first weekly decline in five weeks.

Investors are now looking to Finance Minister Enoch Godongwana’s medium-term budget statement, scheduled for 21 October, for indications of the government’s plans to manage public finances, borrowing and debt.

Possible upgrade 

The budget comes as South Africa seeks to strengthen its public finances and improve investor confidence. BusinessTech reported that credit-rating agency Moody’s had indicated that a possible upgrade would depend on continued improvements in the country’s fiscal performance.

Moody’s vice-president Evan Wohlmann said: “We could upgrade South Africa’s rating if fiscal performance continues to improve.”

The rand’s recent resilience has also been supported by improving confidence in the economic outlook and stronger prices for key commodity exports, including gold and platinum.

South African Reserve Bank governor Lesetja Kganyago told Bloomberg TV, in comments reported by BusinessTech, that “Rand resilience has cushioned, but not shielded us from the shock.”

Sustained fiscal discipline

Meanwhile, BusinessDay reported that Moody’s had warned that sustained fiscal discipline and stronger economic growth would be essential for South Africa to secure a credit-rating upgrade.

On the Johannesburg Stock Exchange, the Top-40 index rose about 0.2% in early trading on Friday, while the yield on the benchmark 2035 government bond fell 1.5 basis points to 8.69%, according to Reuters.

The rand’s gains remain sensitive to international market movements and domestic fiscal policy. Investors will be watching next week’s budget statement for evidence that the government can maintain fiscal discipline, manage debt and sustain the economic improvements needed to support the currency.