Treasury is currently working on ‘phase 2’ of economic interventions to help South Africa weather the coronavirus lockdown, and the impact of the prolonged closure, says finance minister Tito Mboweni.<\/p>\n
In an address on Tuesday (14 April), Mboweni said that this will include a revision of the country’s fiscal framework to take into account the effect of Covid-19 on the fiscus.<\/p>\n
He added that there\u00a0are a number of elements in the fiscal response, including:<\/p>\n
“Together with my colleagues in the economic cluster, have put together a few proposals on how we can further grow the economy,” Mboweni said.<\/p>\n
“These will announced shortly. Amongst the measures we are looking is expanded support for SMME lending through the banking system, similar to other countries.”<\/p>\n
Mboweni added that government\u00a0is exploring all funding avenues to finance all Covid-19 related programmes and measures aimed at addressing the pandemic.<\/p>\n
“The funding avenues will not be limited locally, but will include exploring all global partners and international finance institutions. Funding transactions will be announced officially once concluded,” he said.<\/p>\n
Long-term focus<\/strong><\/p>\n Mboweni said that the Covid-19 pandemic and measures taken to address its spread have had a substantial negative impact on economic growth and government\u2019s fiscal position.<\/p>\n “The pre-existing fiscal position was precarious, and we must ensure that whatever we do does not harm our long-run fiscal sustainability. The fiscus\u2019 ability to respond to crisis is weak,” he said.<\/p>\n He added that a higher deficit may be accommodated if it is temporary and if reprioritised spending is directed towards crisis (health) response, and direct fiscal support to the most vulnerable.<\/p>\n The other parts of the package involve the drawing down of existing surpluses (e.g. UIF) or increasing the contingent liability of government (guarantees).<\/p>\n “But it is absolutely critical, now more than ever, to focus on raising long-run growth,” he said.<\/p>\n “Beyond the Covid crisis, a major risk facing the economy and the fiscus is if long-run economic growth returns to the pre-crisis averages of between 1-2%.”<\/p>\n Higher levels of economic growth need to become a non-negotiable objective, Mboweni said.<\/p>\n “In the absence of urgent structural reforms, the considerable fiscal actions to mitigate the current crisis may leave the fiscus on the edge of a cliff.<\/p>\n “For example, we must, without any hesitation, act to implement the President\u2019s announcements on electricity, and rapidly work to implement the range of reforms that we had already planned.”<\/p>\n
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