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Ratings agency Moody’s, which still rates South Africa at investment grade after peers Fitch and S&P Global cut it to 'junk', says the revenue projections in the medium term budget policy statement delivered by Finance Minister Tito Mboweni this week are credit negative.
Mboweni told parliament on Wednesday that revenue collections up to the end of September 2018 had grown by 10.7 percent compared to the same period last year, but that the full year tax collections would be R27.4-billion less than expected, of which R20-billion reflected increased value-added-tax (VAT) refunds, and R7.4-billion reflected lower corporate tax and personal income tax.
He said while some of the VAT refunds were ‘once-off’ payments, the National Treasury expected revenue shortfalls of R24.7-billion in 2019/20 and R33-billion in 2020/21.
Moody's said the revenue assumptions underpinning the medium-term fiscal projections "are achievable, but the broadly unchanged spending ceilings will be challenging to meet as the government aims to strike a balance between economic, social, and fiscal objectives".
"The government's revised budget policy statement projects larger fiscal deficits and higher government debt, amid slower growth, a weaker rand and higher interest rates than expected in February, a credit negative," Moody's said.