JOHANNESBURG, Feb 19 (Reuters) - South Africa's rand weakened on Wednesday after the national budget was postponed due to disagreements within the coalition government.
At 1505 GMT, the rand traded at 18.565 against the dollar , down about 0.9% from its previous close.
After his budget speech was postponed, South Africa's Finance Minister Enoch Godongwana said the government would have further discussions and propose a new budget in March.
The Democratic Alliance (DA) said the budget had been postponed because of its opposition to an African National Congress (ANC) proposal to increase value-added tax (VAT) by 2 percentage points.
The ANC will need the support of other parties to pass the budget as it lost its parliamentary majority in an election last year. The DA is its main partner in the government.
Analysts said the knee-jerk market reaction was not surprising, with current volatility expected to be temporary.
"While this lack of cohesion raises concerns about the government's ability to reach consensus, it is worth noting that the GNU (government of national unity) remains intact and actively negotiating – an indication that the process, however fraught, is still functioning," said Danny Greeff, co-head of Africa at ETM Analytics.
Investors were keenly awaiting the budget speech for clues on the coalition government's fiscal priorities, its plans to tackle debt, and economic reforms.
The delay also triggered the sharpest selloff in the country's government bonds since December with the 2052 dollar bond trading roughly 1 cent lower to be bid at 89.20 cents on the dollar .
Jurgen Eckmann, wealth manager at Consult advisory group, said sentiment could soon recover after Wednesday's market selloff.
"When the budget is finally tabled in March, we will hopefully see a stronger, more balanced budget of consensus," Eckmann said.
On the stock market, the Top-40 index closed down about 0.8%.
South Africa's benchmark 2030 government bond was weaker, with the yield up 5.5 basis points at 9.18%.
Additional reporting by Nqobile Dludla in Johannesburg and Marc Jones in London; Writing by Bhargav Acharya Editing by Bernadette Baum, Kirsten Donovan and Angus MacSwan
Source: Reuters