Tito Mboweni says government is mulling basic income grant; rules out approaching IMF for help

Finance Minister Tito Mboweni. Picture: African News Agency (ANA)

Finance Minister Tito Mboweni. Picture: African News Agency (ANA)

Published Apr 14, 2020

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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.

Reuters