Extension of Covid-19 relief grant will cost the government R6bn

The National Treasury will have to find about R6bn to extend the special relief grant for three more months.

The money will be found in the budgets of other government programmes by reprioritising spending and not by increasing overall state expenditure, finance minister Tito Mboweni said on Friday.

President Cyril Ramaphosa announced on Thursday that the grant would be extended when he presented an economic recovery plan to lawmakers. That’s after Mboweni had previously said that the country could not afford to permanently pay the special allowance of R350 a month that was announced in April as part of a R500bn Covid-19 relief package.

“The president has decided to extend [the grant] for three months and the job of the National Treasury is to adjust budgets and make sure that the decision by the president is achieved,” Mboweni said in a phone call. The exact details are still being finalised and the minister said he stands firmly behind “maintaining the fiscal framework”.

Mboweni will present the medium-term budget policy statement (MTBPS) on October 28 after asking parliament to delay it by a week so the Treasury can assess the implications of the government’s economic recovery plan on spending.

A supplementary budget in June showed the fiscal deficit could be more than 15% of gross domestic product this year and gross debt would peak at 87.4% of GDP in four years if the government takes active steps to manage its finances.

Since the June budget, tax collection numbers have shown big shortfalls and data from Statistics SA revealed the economy contracted even more than forecast in the three months to end-June.

Labour and civil society groups called for the special grant to be continued beyond this month after the country shed 2.2-million jobs in the second quarter due to a national lockdown.

Bloomberg