Opposition parties concerned over Budget plan to access reserve funds

Finance Minister Enoch Godongwana delivers the 2024 Budget Speech. Picture: GCIS

Finance Minister Enoch Godongwana delivers the 2024 Budget Speech. Picture: GCIS

Published Feb 22, 2024


Opposition parties have rejected the announcement by Finance Minister Enoch Godongwana that the government will draw R150 billion from the South African Reserve Bank’s (SARB) Gold and Foreign Exchange Contingency Reserve Account (GFECRA) to reduce borrowing costs over the next three years.

The government says the withdrawal of the amount will see the debt service cost decline by R30.2bn over the 2024 medium-term expenditure framework period.

DA finance spokesperson Dion George said Godongwana’s raiding of the SARB reserves was expected.

“It appears that the government intends to drain the Gold and Foreign Contingency Reserve Account of R150bn in the first instance.

“The DA has already indicated that we strongly oppose this desperate bailout measure,” George said.

“This frantic response to South Africa’s self-inflicted fiscal constraints fundamentally misunderstands the role of central bank reserves in maintaining monetary stability and investor confidence. Liquidating reserves for short-term gain will increase inflationary pressures, undermine the credibility of monetary policy, and signal fiscal irresponsibility to international markets,” he said.

George also said resorting to the GFECRA as a fiscal stopgap will diminish South Africa’s standing among global investors and suggest to policy-makers the erroneous notion that fiscal discipline can be forsaken for expedient solutions.

ACDP chief whip Steve Swart said they were concerned about the R150bn to be drawn from the SARB.

“Having run down Transnet, Eskom and causing a logistic crisis, power crisis, we see plundering of SARB. This is something we are concerned about.

“The R150bn from our reserve fund at SARB is to buffer us in cases of capital outflows and protect the SARB.

“We are concerned about that aspect,” he said.

Swart said Godongwana’s Budget failed to address what was critical in terms of economic growth stimulus so that each person can get a job and grow the economy with infrastructure development. “We as the ACDP are disappointed. He could have done more,” he added.

Freedom Front Plus MP Wouter Wessels said the Budget tabled on Wednesday was an indication that the country was in crisis.

Wessels said the R150bn to be taken from SARB was an indication of a government that was not planning for the future or for times of crisis and problems.

IFP deputy leader Mzamo Buthelezi said they were very much worried that the SARB reserves would be tapped.

“It is a clear admission that they (ANC) failed to ignite our economy.

We can’t be excited about that,” he said about the R150bn to be drawn from the reserves.

GOOD Party secretary-general Brett Herron said using the country’s gold and foreign currency reserves to reduce the debt burden was a good crisis strategy.

“The country keeps reserves for extreme crises, which the rates of unemployment and poverty now present.

Having to spend less on debt repayments frees up cash for pressing needs,” he said.

Herron also said the Reserve Bank Act provides for transfers of profits from the reserves to the State Revenue Fund.

“This decision is a demonstration of how government budgeting is about choices. In this instance, the choice to use our reserves to prevent imposing severe austerity measures at a time of enormous financial stress,” he said.

Cosatu said it noted with disappointment the government’s underwhelming 2024-25 Budget that was tabled in Parliament.

Acting spokesperson Matthew Parks said the National Treasury treated the Budget as little more than a bean-counting exercise and failed to seize the moment to respond decisively to the myriad challenges workers, society, the economy and the state are facing.

Parks also said they supported the government’s agreement with the SARB to release R150bn from its reserves to ease the fiscal pressures.

“It is critical these reserves be used strategically to stabilise and rebuild Eskom and Transnet in particular, as this can only be a once-off relief and needs to be utilised to grow the economy and reduce unemployment,” he said.

Cape Times