Analysts at TD Securities explained that as we expected, in today’s annual budget speech Finance Minister Pravin Gordhan projected an even more rapid narrowing of the budget deficit over the coming years than was given in the Medium Term Budget Policy Statement (MTBPS) last October. Key Quotes: The deficit is projected to be 3.2% in 2016/17 (MTBPS: 3.3%) falling to 2.4% in 2018/19 (MTBPS: 3.0%). The FinMin plans to achieve this feat against the backdrop of anaemic economic growth by a combination of revenue raising and expenditure cutting measures. Revenues will be raised by increases in the fuel levy; ‘sin’ and ‘environmental’ taxes; and increases in the capital gains tax and transfer duty. The main expenditure cuts come from a reduction in civil service wage bills and government inefficiencies. In spite of the projected narrowing in the deficit, gross government debt to GDP is seen as stabilising just above 50%. The Achilles heel of the proposals is the growth assumption along with the targeting of savings in government administration. We think the risk of slippage on both counts is high. At best we think today’s budget might have bought South Africa some time. But we still expect the sovereign to be downgraded to sub-investment grade this year by S&P, with the action perhaps now more likely to happen in December rather than in June." For more information, read our latest forex news.