MTBPS: New inflation target and debt commitment solidify SA’s post-grey list credibility

Cross-border payments provider Verto has welcomed the Medium-Term Budget Policy Statement, stating that Finance Minister Enoch Godongwana delivered the necessary macro-economic certainty to fully leverage the country’s recent exit from the FATF grey list.

Verto had called for the mini budget to reinforce South Africa’s commitment to financial stability and regulatory certainty, leveraging the “massive credibility boost” of the delisting.

“The minister has met the moment,” says James Booth, Verto’s Head of Revenue. “Exiting the FATF grey list was the essential regulatory win. Today, the commitment to stabilise debt at 77.9% of GDP, and the bold announcement of a new, lower inflation target of 3% with a 1 percentage point tolerance band are the crucial fiscal and monetary follow-ups required to solidify that credibility.”

Verto believes the lower inflation target is a major boon for the cross-border payments ecosystem. The minister stated that, over time, the lower target will decrease inflation expectations and inflation, creating room for lower interest rates and boosting economic growth.

“A stable currency is a major determinant of the cost of cross-border trade,” Booth explains. “The new inflation target signals a fundamental commitment to long-term price and currency stability, which will further reduce friction, compliance costs and processing delays for international transactions”.

However, Verto notes that while the macro-economic framework is sound, the minister did not announce specific new policies on capital flow or currency management to reduce friction for international traders.

“The foundation has been laid. Now, we look to the next fiscal cycle for targeted policies that will reduce the operational friction in capital flow and explicitly support the fintech sector to fully realise the benefits of this financial stability for South African businesses trading globally,” says Booth.

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