Finance Minister Pravin Gordhan has dismissed the idea of a government development bond proposed by Economic Development Minister Ebrahim Patel, Business Day newspaper reported on Tuesday.
Patel had suggested that financing for development could be raised by requiring pension funds to invest 5% of investible funds in an appropriate mechanism.
In a written reply to a parliamentary question, Gordhan said “deep and liquid domestic financial markets … currently ensure the availability of funding to finance government’s borrowing requirement.”
Patel, a former trade unionist, was handpicked by the labour federation and ruling ANC ally the Congress of South African Trade Unions to influence economic policy in president Jacob Zuma’s Cabinet.
But Zuma’s government has made few economic policy concessions to the leftists.
The Treasury released a statement late on Monday saying it was in discussions with Patel’s department and “government continuously considers various funding instruments as part of the development of our financial markets.”
In the written reply, Gordhan also said the government’s borrowing requirement would not increase because it had “been determined through the due process prescribed in law”.
Public sector borrowing requirement is expected to rise to 11,1% of GDP in 2010/11 to make up for lower revenue and government plans to reduce it to 7,1% by 2012/13.
The government launched a $2-billion foreign bond in March and plans to borrow a further $5-billion over the next few years from international capital markets.
Locally, it has increased the amount if offers in weekly auctions to more than R2-billion a week, from about R1-billion a year ago. – Reuters