Tito’s emergency budget looms amid fears of second Covid-19 wave

The rand was slightly weaker against the dollar on Monday morning, amid fears of a second wave of Covid-19 and ahead of Finance Minister Tito Mboweni’s supplementary – “emergency” – budget to be delivered on Wednesday.

The minister will deliver the budget on Wednesday, which Treasury said was necessitated by President Cyril Ramaphosa’s announcement that government would spend R500 billion to support the economy following the outbreak of Covid-19 and the resultant lockdowns.

On Monday morning, the president – in his weekly letter to the nation – hinted that whatever the finance minister presents, fellow South Africans should in the least be prepared:

“Revenue has plummeted and difficult decisions will be made in the coming weeks and months as we seek to reprioritise our programmes, manage public spending and scale back on projects where necessary,” Ramaphosa wrote.

“The economic hardship that has been forced on a number of companies in the private sector will be forced on a number of entities in the public sector as well. The government, business, labour and civil society will have to deepen their collaboration as never before in driving the national recovery effort.”

According to X-rates, on Sunday evening, the rand was trading at around R17.43 to the US dollar and on Monday, it was trading at R17.37 against the US currency.

Financial services provider Peregrine Treasury tweeted on Monday: “Emerging markets remain under pressure as Covid-19 breakout in Beijing has raised fear of a second wave, while tensions flare between India and China and North Korea vs South Korea. Local unemployment figures and the emergency budget are due and local CPI will set the course for any SARB interventions.”

The rand’s week ahead. Here’s what to watch out for in the markets this week.#ZAR #FX #Markets #TreasuryManagement pic.twitter.com/x3wDcSbujL

— Citadel Global (@Citadel_Global) June 22, 2020

The Democratic Alliance (DA) has said that Mboweni’s budget should be resilient to help the country brace for the impact of Covid-19.

DA MP Geordin Lewis said: “Negligible economic growth and high levels of debt have obliterated South Africa’s ability to engage in counter-cyclical measures – to save in times of plenty, and to spend in a time of crisis.”

Lewis said the Covid-19 pandemic has made government, South Africans and businesses “vulnerable”, with “many people” losing “their lives and livelihoods”.

“There is no doubt that the ANC-led government will table this ‘emergency budget’ with blood on its hands,” Lewis said.

The DA MP said a “resilience budget” would mean that during the Covid-19 pandemic, neither sharp cuts to basic services nor “a big expansion to spending” would be possible at the moment.

“The only available option is a very careful deployment of debt to fund the crisis response while ensuring economic reform can spur growth, and showing a clear path to debt stability,” said Lewis.

The party expects Mboweni’s budget to:

• provide a credible plan for deploying debt and resources efficiently in the medium term to provide crisis relief,
• put in place measures that will allow us to stabilise debt and avoid wide-scale impoverishment by growing the economy.

(Compiled by Makhosandile Zulu)

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