South Africa plans budget cuts and funds reallocation to tackle recession

South African Treasury plans to further cut government spending and reallocate funds to help boost growth in Africa’s most industrialized economy currently hit by recession.

Finance Minister Malusi Gigaba said on Thursday that the country’s Treasury will try to maintain its fiscal target announced in February, despite planned budget cuts.

“We do realise that there are hard decisions to be made … that may require that we look at further cuts to government spending and programmes,” Reuters quoted Gigaba to have said at a news conference.

“In this context, our 2017 growth projection of 1.3 percent may not be realised,” he said. “This continues the trend of low growth over the last several years, undermining our progress in significantly reducing inequality, unemployment and poverty.”

South Africa slipped into recession for the first time since 2009, according to data released on June 6. As the African economic powerhouse battles recession and credit downgrades, its president Jacob Zuma faces corruption allegation. But Gigaba says the government is working hard to tackle the current challenges.

“We are committed to restoring … a favourable investment grade rating with a positive outlook as quickly as possible,” Gigaba said.

He also added that President Zuma held a meeting with several cabinet ministers to discuss ways to revamp the economy.

Gigaba was appointed as finance minister in March after Zuma sacked Pravin Gordhan who had the confidence of international investors.

When Moody’s lowered South Africa’s rating to the bottom of the investment grade table on Friday, it cited Zuma’s cabinet reshuffle.