South Africa to Allocate Last 45 Billion Rand of Virus Stimulus
South Africa’s National Treasury will begin allocating the remaining 45 billion rand ($2.6 billion) of a coronavirus-relief package in October.
While President Cyril Ramaphosa announced a 500 billion-rand stimulus package April, the National Treasury only outlined plans to spend 455 billion rand in a special adjustment budget presented last month. The plans for the remainder will be outlined in the October medium-term budget policy statement and the February budget review.
Pressures in some departments, including those previously earmarked for budget reductions after Ramaphosa’s announcement, “the lack of readiness of certain projects, such as the job-creation program, and a further deterioration in the fiscal position after the president’s announcement, resulted in adjustments to the announced intervention,” the National Treasury said in an emailed response to questions.
The total stimulus package will remain at 500 billion rand, even though the supplementary budget process identified only 145 billion rand for immediate allocation, the Treasury said. The new grants will require a further reprioritization of spending, it said
“The Treasury has taken a prudent approach to the budget by making allocations in line with credible plans and in a manner designed to mitigate the significantly worsened fiscal situation,” it said.
South Africa’s gross domestic product will probably contract 7.2% in 2020, the most in almost nine decades, due to the coronavirus pandemic and restrictions put in place to curb its spread. The consolidated budget deficit is expected to surge to 15.7% of GDP this year and gross debt-to-GDP is likely to peak at 87.4% in 2023-24, according to government estimates.
Even before the pandemic, South Africa was stuck in its longest downward economic cycle since World War II and the economy was in recession. Its fiscal decline accelerated over the past decade as loss-making state-owned companies including Eskom Holdings SOC and South African Airways received a series of bailouts and the government repeatedly failed to rein in public sector wages.
Africa’s most-industrialized economy is counting on $7 billion from multilateral lenders and development finance institutions to support its response to the pandemic. So far, only the New Development Bank, which serves the BRICS nations, has approved a $1 billion facility. The country asked the International Monetary Fund for a $4.2 billion loan at the end of April and plans to request up to $2 billion from the World Bank.
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