Special adjustments budget slated for June
The special adjustments budget will outline a revised fiscal framework to account for revenue losses caused by Covid-19 and the lockdown
Finance minister Tito Mboweni could be ready to table a special adjustments budget on June 24 that will allow additional spending on the Covid-19 response, and cater for the rapidly changing economic conditions in the wake of the pandemic, the Treasury said on Wednesday.
The budget will also outline a revised fiscal framework to account for substantial revenue losses caused by the pandemic and subsequent lockdown, the Treasury said in a guideline document published on its website
The guideline outlines the processes the Treasury plans to run ahead of tabling the budget, however, the final date will be decided by the speaker of the National Assembly in agreement with the president and finance minister, it said in a statement.
“The date of June 24 is the date by which the National Treasury would be ready to table. It does not prescribe whether parliament must organise for tabling on this date,” the Treasury said.
The need for a special budget follows from the announcement of a R500bn stimulus package by President Cyril Ramaphosa in late April, to see SA through the worst effects of the crisis.
The package included R130bn that would come from reprioritisation of departments’ funds in the 2020/2021 financial year. It will also entail an estimated R95bn in additional borrowing from multilateral agencies, such as the International Monetary Fund (IMF) and the New Development Bank.
The full extent of the hit the pandemic will have on the economy, and the state’s finances is still to be tallied, but recent estimates from Sars suggest that tax revenues will be short by an estimated R285bn.
This will have serious ramifications for the state’s budget deficit and debt levels, which were already under pressure before the pandemic took hold in SA — with economists expecting the deficit to rise, with some expecting the deficit to rise above 10%.
The deterioration in these fiscal metrics, along with concerns for economic growth in the wake of Covid-19, saw ratings agencies Moody’s and S&P Global cut SA’s credit ratings in recent weeks.
S&P is forecasting that SA’s budget deficit will widen to 13.3% of GDP — the largest in its democratic history — while it sees debt levels rising to 75% of GDP by the end of 2020.
The special budget process will allow technical amendments to the existing budget to cover adjustments needed for “significant and unforeseeable economic and financial events”; the use of unappropriated funds for spending of an exceptional nature; and virements or shifts within a department.
According to the guidelines, any adjustments not included in the special budget will be tabled in the October adjustments budget, also know, as the medium-term budget policy statement (MTBPS).