Johannesburg - Finance
Minister Tito Mboweni ruled out an International Monetary Fund
structural adjustment programme on Tuesday but said the Covid-19
pandemic would cause a deep recession and stretch weak public
finances.
Mboweni's comments came after the central bank unexpectedly
cut its main lending rate by 100 basis points to 4.25%, another
step to try to limit the economic fallout from the coronavirus.
Africa's most industrialised nation was already in recession
before it recorded its first coronavirus case in March.
Investors are growing increasingly anxious about how the
government will fund a gaping budget deficit while time it's
also making critical healthcare interventions.
South Africa has the most confirmed coronavirus cases on the
continent, at 2,415.
Addressing reporters on a conference call, Mboweni said
cabinet ministers would discuss more economic interventions on
Wednesday.
On the possibility of IMF funding he said: "We are not
looking for budget support. We would be looking for the
Covid-19-specific packages that we can access, and we are
talking to them about that.
"We are looking at programmes which would not be accompanied
by any structural adjustment programme," he said. "We know what
to do, we know what our structural reform programme is."
Asking multilateral institutions, especially the IMF, for
cash is deeply unpopular with a faction in the governing African
National Congress and trade unions the party uses to rally
support before elections. The ANC and two allies warned Mboweni
earlier this month against seeking IMF assistance.
Mboweni said the government would revise its fiscal
framework given the effects of Covid-19 but wouldn't say when an
"emergency budget" might happen.
"The budget revisions are happening almost every day, ... at
some stage very soon we will have to make a consolidated budget
statement," he said.
Mboweni said the government had not decided whether to introduce a basic income grant to ease the burden of the lockdown on working class citizens, but that it had to be considered. He added that no agreement had been reached on pay increases for public-sector employees due to take effect this month.
A copy of the minister's speaking notes circulated by the
National Treasury said elements to the government's fiscal
response included re-prioritising some expenditure towards
healthcare, a plan to stabilise debt and shutting down South
African Airways.
The airline is under a form of bankruptcy protection and
depends on government bailouts for its survival. Mboweni
declined to elaborate.
ECONOMIC DESTRUCTION
Ramaphosa's government has been praised for imposing
restrictions on movement before any coronavirus deaths had been
recorded. But attention is now turning to the probable economic
consequences.
Central bank governor Lesetja Kganyago told a news
conference on Tuesday that the bank's decision to cut rates was
unanimous, after Ramaphosa extended a 21-day lockdown for a
further two weeks on Thursday.
"Both the supply and demand effects of this extension reduce
growth in the shorter term as businesses stay shut for longer
and households with incomes spend less," Kganyago said. "This
will likely also increase job losses."
The central bank now expects gross domestic product to
contract 6.1% in 2020.
The rand turned weaker after the central bank rate
cut and its bleak assessment of the economy's prospects, trading
down around 1.7% at 18.3650 to the US dollar at 1330 GMT.