Rating’s agency Moody’s has warned that the water crisis affecting Cape Town could have a direct impact on the City’s budget and economy.

According to Moody’s the water crisis could cause the city’s borrowing to rise sharply and the provincial economy to shrink the longer the situation lasted.

In a report issued on Monday, the agency said one of the most direct impacts would be on Cape Town’s operating revenues, as 10% of them are from water charges.

Reuters on Tuesday reported that the ratings agency estimated capital expenditure related to water and sanitation infrastructure could be as much as R12.7 billion over the next five years.

“The long-term solutions are likely to require significant capital and operating expenditure,” Daniel Mazibuko, an analyst at Moody’s told Reuters.

The drought, which is expected to cut the Western Cape’s agricultural output by 20% in 2018, is also threatening to slow South Africa’s economic rebound which has been fuelled by a surge in agricultural production according to Reuters.