South Africa’s rand rebounded yesterday as traders bet that a budget released the day before would persuade ratings agency Moody’s not to downgrade the country’s debt to “junk” status next month.
President Cyril Ramaphosa, who faces divisions within his ruling African National Congress before parliamentary elections in May, has staked his reputation on reviving South Africa’s economy.
Finance Minister Tito Mboweni on Wednesday painted a bleaker outlook for growth and debt in a budget that gave a 69 billion rand ($5 billion) bailout over three years to Eskom, the struggling state power utility.
Analysts have said the bailout gives Eskom several years to implement a restructuring plan but still leaves it facing an uncertain future with unsustainable debts, crippling costs and stagnant sales.
A senior Treasury official said yesterday that the government had included in its national debt-to-GDP projections a further 23 billion rand of annual support to Eskom after the three-year period outlined in the budget.
“We estimate that Eskom’s balance sheet requires support of approximately 150 billion rand. This amount, amortised over 10 years, amounts to about 23 billion rand per annum,” Ian Stuart, a senior official at the budget office, told Reuters.