Business Maverick: Budget: Rand and bonds rally as local debt issuance cut – reaction from economists broadly positive

Domestic markets rallied just after Finance Minister Tito Mboweni began speaking, with the rand strengthening to around 14.40/dlr from 14.55, while bond yields dropped a few basis points. This speaks to the fact that it was not as bad as many expected – there was also a pledged cut in domestic debt issuance. That doesn’t mean that economists are popping bottles of bubbly, which are about to climb in price with an 8% hike in sin taxes.

The relative tax relief outlined in the Budget was possible because Sars has collected more revenue this fiscal year than it anticipated a few months ago amid the pandemic-triggered economic meltdown. “While the average health care worker deserves a bonus from a grateful nation, many other public sector workers don’t.”

“The key headline takeaway from the South African budget was a larger than anticipated reduction in local currency bond issuance. Both the rand and SA government bonds have rallied on this news, although the primary driver appears to be a shift in the government’s funding strategy, with a more sizable drawdown of existing cash balances,” said Razia Khan, chief economist Africa and Middle East at Standard Chartered Bank.

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