The South African government presented a medium-term budget plan on Wednesday, which addresses the right issues but falls short of proposing concrete measures to achieve the goals.
Hence, we consider the implementation risks to be significant amid political uncertainty.
Although rating agencies' initial reactions to the plan have been moderately positive, rating downgrade risks persist in our view and we see around a 50% chance of a downgrade.
We keep our current forecasts for the USD/ZAR of 13.80 (December), 14.20 (March) and 14.50 (September), which assume no downgrade. However, there is significant upside risk if South Africa is downgraded.
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