Ratings agency Moody’s has released a report saying that Finance Minister Tito Mboweni’s recent announcement of the Appropriation Bill, which was approved in parliament and will see R59 billion in additional support going to Eskom, will be an additional drain on the economy which would be “credit negative” for South Africa.

Government’s financial room to maneuver would be “extremely constrained” by the bailout, the report suggests.

“South Africa’s sluggish growth outlook limits its ability to absorb the extra cost of Eskom support,” it says.

Moody’s is the last of the three big international ratings agencies to have South African debt at investment grade, with economists expressing fears that they will soon downgrade us.

READ MORE: When is Moody’s going to put us out of our misery and downgrade us?

Moody’s said it expected South Africa‘s fiscal deficit to widen to 5.7% of GDP in 2019 and 5.6% in 2020, up from current projections of 5.2% and 5.0% respectively, although this would be in a worst-case scenario where none of the debt is compensated for.

“The government may try to absorb part of this extra cost with new revenue or expenditure measures in the next mid-year budget exercise, the Medium-Term Budget Policy Statement (MTBPS), expected on 23 October, but we think its room to maneuver is extremely constrained”.

While the report does not constitute a change to our rating by the agency, Moneyweb’s Patrick Cairns recently suggested that a downgrade from Moody’s at some point was inevitable.

“Most analysts have also continually reminded investors that the downgrade is priced in. This is not something that will shock the market if everybody knows it’s coming,” he wrote.

The Government of South Africa’s proposal to more than double support for #Eskom is credit negative for the sovereign because it would be an additional drain on fiscal resources #MoodysAfrica https://t.co/gYcDgScmWG pic.twitter.com/i2DXDoWGxR — Moody’s Africa (@moodysafrica) July 25, 2019

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