Mboweni is due to present a special supplementary budget on June 24, which will include the redirecting of 130 billion rand ($7.5 billion) of spending to help fund a 500 billion-rand rescue package announced by President Cyril Ramaphosa.
The revised fiscal plans will reflect the devastation wrought on the economy by the coronavirus and the associated lockdown to curb its spread. The restrictions have weighed on tax income as many businesses couldn’t operate and some have shut down permanently.
“The budget process is in its final stages and still being finalized,” Treasury spokeswoman Mashudu Masutha-Rammutle said by text message. “This includes data and estimates. In this regard, any information published now, especially from unverified leaks, is potentially inaccurate compared to what will be tabled.”
Mboweni will also probably present revised economic growth and budget-deficit numbers. He said in April the tax take could fall by 32% and the fiscal shortfall could swell to more than 10% of GDP, compared with the 6.8% of GDP projected in February. The gap could be 13.7% of GDP this fiscal year, according a Bloomberg survey. The economy will contract 7% this year, according to the central bank.
Public-sector debt may rise to 6.4 trillion rand over the next three years, Martin Kingston, vice president of business group B4SA, said in a presentation at Friday’s meeting. The country’s borrowing need may be as high as 3.4 trillion rand over three years including private sector needs, he said.
“In the absence of significant structural reforms, debt-to-GDP levels will increase to unsustainable levels over the next three to five years,” he said.
The country’s finances have deteriorated rapidly over the past decade, partly due to a series of bailouts for loss-making state-owned companies including Eskom Holdings SOC Ltd. and South African Airways. Mboweni on Thursday told lawmakers that the government must cut spending to avoid a sovereign debt crisis by 2024.
A debt crisis would force the nation to seek help from the International Monetary Fund, which would result in public service and state pensions being slashed, along with “all kinds of structural reform programs we do not want,” Mboweni said at the parliamentary meeting.
The pandemic has already forced the ruling African National Congress to break its resistance to borrowing from the IMF and request a $4.2 billion loan to cover virus support. The lender has not yet approved the funding, which must help pay for the 500 billion-rand stimulus package. The New Development Bank approved a $1 billion emergency loan for South Africa, it said in an emailed statement on Saturday.