Tito Mboweni repeats that he wants an independent Reserve Bank
Earlier, the ANC’s Enoch Godongwana suggested the Bank help fund development and infrastructure through the creation of a R500bn fund
Faced with a budget deficit that’s likely to reach wartime levels, finance minister Tito Mboweni is rebuffing suggestions that the central bank help plug the hole.
SA’s budget shortfall is forecast to exceed 10% of GDP in the fiscal year to the end of March 2021 as restrictions to curb the spread of the coronavirus weigh on economic activity and sap tax revenue. The largest gap on record was 11.6% of GDP in 1914, followed by 10.4% in 1940.
Mboweni, a former SA Reserve Bank governor, said on Twitter that he was against printing money and wanted the Bank to remain independent. His comments came after Enoch Godongwana, the ANC’s head of economic transformation, suggested that the bank help finance development and infrastructure through the creation of a R500bn fund, while deputy finance minister David Masondo has said he would support direct central bank purchases of government debt.
With GDP set to contract the most in at least four decades, pressure on the Reserve Bank to play a bigger role in bolstering the economy is increasing. However, it has ruled out paying for government spending through loans.
“It would blur the lines between an independent central bank and publicly elected office bearers,” deputy governor Kuben Naidoo said in a conference call on Tuesday. “If we were to finance the government directly, there would be no pressure on the government to manage their costs in any way.”