Finance Minister Pravin Gordhan faces a tough challenge

Reading Time: 2 minutes

Finance Minister Pravin Gordhan is facing a tough challenge as he prepares to table his budget speech next week.

South Africa’s slow growth, severe drought, a possible downgrade to junk status and the depreciation of the rand are just some of the issues to be considered.

Observers say borrowing is not an option due to the weakened rand and the need to narrow the budget deficit.

Policy analyst, Mmapula Sekatane says government should rather re-prioritise than borrow: “With all this somehow we will need to get money from somewhere if we say we will have to borrow already the rand is weak which is putting pressure on the country borrowing won’t seem like an alternative but then it means we have to re-prioritise because we have to narrow the budget deficit.”

Meanwhile, inflation has breached the upper target band of the Reserve Bank and is now at 6.2%.
This is up from the 5.2% seen in December.

This means that the bank might hike rates again at its next meeting as it tries to contain inflation.

Figures that Statistics South Africa (Stats SA) has released show that that Consumer Price Index data edged higher as prices of goods continue to rise and the rand weakens further.

Economists say 2016 will be a tough year for consumers.

– By