Treasury seeks to limit fiscal deficit
• Officials working on plans to tackle funding pressures from Covid-19
The National Treasury is working to limit the fiscal deficit through reprioritisation, spending adjustments and postponement of certain initiatives in its bid to manage the effect that the nationwide shutdown will have on the economy and the state’s budget.
While fiscal policy alone cannot address the increasing pressure that SA faces under the Covid-19 lockdown, the Treasury said that it would continue working on proposals on how to deal with funding pressures created by the crisis, directorgeneral Dondo Mogajane said on Tuesday.
On Monday, President Cyril Ramaphosa announced the intensified measures to halt the spread of the coronavirus and prevent the country’s health system from being overwhelmed. The decision came after the number of reported cases of Covid-19 rose more than sixfold in a week. On Tuesday morning, health minister Zweli Mkhize confirmed that cases had reached 554.
The virus struck SA when its economy was already weak, having fallen into recession in the fourth quarter of 2019.
Although Ramaphosa announced a range of measures to support the economy in the coming months, ranging from targeted support for small businesses to a series of tax measures, SA was already under strain before the virus hit.
In its February budget, the Treasury was expecting a budget deficit of 6.8% in 2020/2021, while the government’s debt levels were expected to reached 71.6% by 2022/2023.
Due to the virus, these metrics are likely to deteriorate substantially — at a time when many economist expect the country’s growth to shrink substantially.
The government must continue to fund itself through the crisis and despite the turmoil in capital markets.
“For now, the National Treasury is working within its means and, depending on the impact of the virus, different options will be considered,” Mogajane said.
To manage the budget process through the lockdown, Mogajane said the Treasury would explore an amended appropriations bill, but in the meantime where possible allow virements, the transfer of resources from one programme to another within the same department.
“This can be considered [part of] the initial response to the coronavirus, in so far as reprioritising towards the front-line sectors is concerned,” he said.
“But, that said, the Treasury is still assessing the macro-economic impact of the pandemic, as well as the recent escalation of measures to deal with the outbreak.”
This was in addition to other factors such as the oil production dispute between oil cartel Opec and Russia, and idiosyncratic domestic factors such as load-shedding, which would ultimately inform any decisions on the fiscal framework, Mogajane said.
“All things being equal, we can still use the mediumterm budget policy statement (MTBPS) to retable the budgets and the new fiscal framework,” he said.
Constraints aside, Mogajane said the Treasury “stands ready” to support the collective work of government and the interventions being developed by various ministries in response to the crisis. The Treasury has relaxed government procurement processes for goods needed to fight the coronavirus, and will later issue guidelines on how to access the support measures announced by the president.
Mogajane said that all regulators, such as the SA Reserve Bank, Sars and the Financial Sector Conduct Authority, will continue to operate through the lockdown.
TREASURY IS STILL ASSESSING MACROECONOMIC IMPACT OF PANDEMIC AND RECENT ESCALATION OF MEASURES TO DEAL WITH IT
WE CAN STILL USE THE MEDIUM-TERM BUDGET POLICY STATEMENT TO RETABLE BUDGETS AND THE NEW FISCAL FRAMEWORK