JOHANNESBURG - Lobby group Business Leadership South Africa (BLSA) has called for an emergency budget as an immediate response to the economic impact caused by the coronavirus pandemic and consecutive credit ratings downgrades. BLSA said yesterday that the government needed to move with speed, as the worsening economic situation in the country would disproportionately hit the poor.
Chief executive Busi Mavuso said that in times of emergency the country needed emergency measures.
Mavuso said direct support was going to be needed through feeding schemes and financial support as the country observes the 21-day lockdown to prevent the spread of the disease that has infected 1605 people and killed 11 others.
“We need an emergency budget this month to deal with the economic destruction wrought by the coronavirus and two consecutive downgrades of our investment ratings,” Mavuso said.
“The crisis demands dramatic measures. An emergency budget would be the first step in tackling the country’s debt situation, with resources also reallocated to where they’re now needed most to address the coronavirus effects.”
Finance Minister Tito Mboweni said last month that the government would implement budget cuts across various departments to fight the virus, with the primary source of funding to come from the National Disaster Fund.
Mboweni has said there were no plans yet to revise the budget, but that South Africa may approach the International Monetary Fund and World Bank for Covid-19 health relief.
BLSA’s call joins those of others who have called on Mboweni to table an emergency budget in view of the downgrades that have seen a massive sell-off by investors and the rand hitting all-time lows against the dollar.
Last month, Moody’s slashed the country’s sovereign bonds to junk with a negative outlook, due to weak economic growth and deteriorating fiscal position.
On Friday, Fitch also pushed the country two levels below investment grade, sending the rand crashing to R19.03 to the dollar. Fitch said the country lacked a “clear path towards” stabilising its debt and maintained a negative outlook on rating.
The rand managed to claw back some of its losses to change hands at R18.71 against the greenback by 5pm yesterday.
The FTSE/JSE All Share Index inched up 3.68percent to 46240.35 points, while the Top 40 Index closed 4.06percent higher at 42534.54 points.
Investec’s chief economist, Annabel Bishop, said the additional expenditure measures would worsen government finances. Bishop said breaking the spread of Covid-19 was paramount, as the costs would be even more substantial if it was not.
“South Africa’s credit ratings face further downgrades, and it is imperative that government spending be contained to prevent further slippage down the rating ladder, and so eventual application to the IMF to come under its adjustment programme in order to access funding,” Bishop said.
“Failure to turn the escalating debt trajectory around for South Africa, and bring it down substantially lower will result in further credit rating downgrades for South Africa.”