Finance Minister Pravin Gordhan faces a tough balancing act today when he announces a mid-term budget meant to boost the sickly economy and show his fraud case is not distracting him.
Gordhan has said he plans to reduce government spending, raise taxes and cut the budget deficit to 3.2% of gross domestic product (GDP) in the 2016-17 fiscal year, from 3.9% in the previous year.
Analysts said any fiscal slippage could trigger credit ratings cuts to junk, and they saw little room for manoeuvre in an economy that the central bank expected to grow by only 0.4% this year.
“There is no space to loosen fiscal policy, or do much expenditure switching, ahead of the 2019 national election,” Roubini Global Economics emerging markets analyst Maya Senussi said.
Investment Solutions chief economist Lesiba Mothata said: “With the political machinations [the fraud charges against him, and pressure to provide more subsidies for students], it becomes difficult for Gordhan to put something on the table that says we are re-engineering the economy for a different path.”