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Africa|Nuclear
Africa|Nuclear
africa|nuclear

South Africa rand weaker as budget risk raises second wave Covid-19 fears

South Africa rand weaker as budget risk raises second wave Covid-19 fears

Photo by Reuters

22nd June 2020

By: Reuters

  

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South Africa's rand weakened early on Monday, reflecting the gloom in global markets as fears of a second wave of coronavirus infections around the world increased investor jitters ahead of a local emergency budget later this week.

At 0700 GMT the rand was 0.49% weaker at 17.4050 per dollar from Friday's 17.3200 close, with the sell-trend that took root last week, pushing the currency to its lowest in June, set to continue until at least Wednesday's budget.

Bonds also took a hit, with the yield on the government issue due in 2030 up 9.5 basis points at 9.315%.

Finance Minister Tito Mboweni is expected to paint a bleak picture in a revised budget that comes almost three months after government announced a R500-billion ($28.78-billion) stimulus package leaning heavily on new borrowing.

The treasury said at the weekend that a $1-billion emergency loan from the New Development Bank - or BRICS Bank - had been approved. It was the first in a raft of financing from multilateral institutions set to push the budget deficit into double digits and debt past the 60% of GDP threshold seen before the coronavirus pandemic.

"Not only will treasury have to contend with a marked reduction in revenue due to the economic collapse, but Mr Mboweni will have to reprioritise R130-billion towards the fiscal stimulus plan (and) provide clarity on the 160 billion in saving from a reduction in the public sector wage bill," analysts at NKC African Economists said in a note.

Global events also did little for sentiment towards risk-sensitive assets like the rand. Global Covid-19 cases rose past 8.8 -illion while a border dispute in the Himalayas between nuclear powers China and India in which at least 40 soldiers died also unnerved investors.

Edited by Reuters

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