Bold budget hikes tax, cuts spending
The VAT rate rises for the first time in decades, while a looming Moody’s downgrade could be averted
Finance Minister Malusi Gigaba delivered a budget of bold decisions that exceeded market expectations, slashing spending and hiking taxes in a bid to arrest the deterioration in public finances and avert further rating downgrades. Wednesday’s budget saw the first increase in the VAT rate in a quarter of a century, a measure that was pointedly avoided by the ANC in past due to its effect on poor people. Economists’ consensus was that the budget would stave off a Moody’s downgrade later in February. The rand rose as much as 10c to the dollar as Gigaba was speaking, while the JSE all share gained momentum after being flat at midday. Government bonds attained levels last seen in early 2015. The rand reached R11.61/$, before softening to R11.65/$ on Wednesday night. The government’s benchmark R186 bond strengthened to 7.97% at one stage, before pulling back to 8%. The longer-dated R207 firmed to 6.63%, from Tuesday’s 6.745%, its best level since February 2015. The local bourse ended the ...
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