Budget breaks President Ramaphosa's promise - economists' letter to MPs
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 R500 billion, even though the supplementary budget process identified only R145 billion for immediate allocation, the Treasury said. The new grants will require a further reprioritization of spending, it added.
"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.
Africa's most-industrialized economy is counting on U$7 billion (about R12 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 U$1 billion facility. The country asked the International Monetary Fund for a US$4.2 billion loan at the end of April and plans to request up to US$2 billion from the World Bank.