PRETORIA – South Africa's latest medium-term budget policy statement shows evidence of further weakening in the country's public finances, rating agency Fitch said Friday. Finance Minister Pravin Gordhan's budget policy statement, released Thursday, was widely welcomed due to the minister's commitment to crack the whip on soaring state spending. Fitch said failure to deliver projected fiscal consolidation continued to erode one of the country's key rating strengths compared with its peers. “This erosion contributed to our decision to revise the outlook on South Africa to negative in January,” Fitch said. Fitch's long-term foreign currency rating for South Africa is BBB+. Without giving too much indication of whether it would again lower the country's rating, the agency said it expected “to complete our annual rating review early in the new year.” It raised concern that the government appeared to be “falling behind” on its longer-term fiscal consolidation program after Gordhan upwardly revised the 2012-13 projected budget deficit to 4.8 percent of gross domestic product (GDP), from an earlier estimate of 4.6 percent of GDP. Gordhan also revised the forecast budget deficit for 2013-14 to reach 4.5 percent of GDP, from an earlier forecast of 4 percent in February. “Although this reflects weaker than expected revenue growth, rather than higher expenditure, the further delay to fiscal consolidation highlights the challenges to fiscal planning and will put upward pressure on debt levels,” Fitch warned. Gross debt was now forecast to peak at 42.7 percent of GDP in 2015-16, “slightly above BBB rated peers.” – Agencies
