Peter Attard Montalto, emerging markets economist at Nomura International said on Tuesday that the National Treasury had walked the fine line between having credible policy on the one hand and a credible set of forecasts on the other hand.

"Most interesting are concerns expressed in the Medium Term Budget Policy Statement (MTBPS) around the rand strength and resulting relaxation of exchange controls that should remove some inflow pressure on the currency," Attard Montalto said.

He said that it was difficult to quantify the effect, but it should certainly lead to a less volatile currency across the whole cycle. "This policy shift is very welcome. Some comments around further debate on inflation targeting are unwelcome however.

"Whilst Gordhan was clever in framing the debate in terms of the global debate on inflation targeting, markets still look for certainty on this front across the change in SARB Governor," Attard Montalto said.

The economist however pointed to three concerns, including the public sector borrowing requirement of R284.5-billion for this year and R294.4-billion rand [for next year] is right at the very top of what the sovereign can afford to extract from markets.

"There is therefore no room in our view for any slippage of the budget from the current projections this year or next. This allows no room for error with a more sluggish recovery," Nomura said.

"We feel more could have been done on the side of provincial and local government efficiency savings and constraints around overspending on budgets in that area," the group added.

"There was little mention of election promise bills such as housing bill, welfare changes and national health insurance scheme. Whilst they may well be on the back burner given the state of the finances (rightly so), they are key upside risks for the budget balance into the end of the MTBPS forecast horizon," it said.

"There seems to have been some degree on spending constraint by central government with savings of R27-billion offsetting an extra R78-billion in spending, but importantly that extra spending has been back loaded to 2012/13 when revenues are expected to have bounced back," Montalto said.

"Equally I think that there has seen some degree of constraint around election promises in terms of the welfare bill, housing bill etc in the MTBPS. There was clearly no extra room in the budget to make commitments on this front and so Gordhan seems to have won the argument in cabinet on this for now at least," he said.

"Yesterday we said today's MTBPS would be crucial to securing the future credibility of South Africa's fiscal policy. They have secured their credibility with greater constraint in spending and some savings and efficiency measures. That said there are still upside risks to the budget deficit in coming years and revenue measures may also need to be considered in February's budget," the economist concluded.