<\/p>\n
The National Treasury has the fiscal space to extend its fuel levy relief for May and even into June if oil prices remain elevated around or above the $100-a-barrel mark, says Citi South Africa economist Gina Schoeman.<\/p>\n
Speaking at a Citi Group economic briefing in Sandton, Johannesburg, on Thursday she said Treasury \u201cdo have space for another reduction in the fuel levy [extending the relief] in May\u201d \u2013 but they will likely be tight-lipped about such a move until late in April.<\/p>\n
Read:
No April Fools\u2019 joke: Diesel still rockets over R7\/l, petrol over R3\/l
Government cuts fuel levy by R3 to curb price shock<\/p>\n
The international banking group is reportedly SA\u2019s largest foreign bank and the sixth largest commercial bank, according to Citi\u2019s website.<\/p>\n
Schoeman said Treasury will take a cautious approach and \u2018not risk the market getting used to it\u201d as the reduction in the fuel levy by R3-a-litre is a temporary measure to help mitigate the impact of the oil price shock on South Africans and business following the Middle East conflict.<\/p>\n
She added that while there is room for extending the relief into May, it will have a negative impact on government revenues.<\/p>\n
\u201cHowever, National Treasury is in a much more credible fiscal position than a few years ago in terms of outlook,\u201d she said.<\/p>\n
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Lower SA risk premium<\/p>\n
\u201cSA\u2019s risk premium has come down. If this situation [Iran war and Middle East fallout] happened 10 years ago, I think the rand will have weakened much more\u2026<\/p>\n
\u201cGovernment\u2019s spending discipline has also improved\u2026 giving Treasury the flexibility to make such a move [extend the relief into May].\u201d<\/p>\n
While National Treasury said last month that the fuel relief measure would affect its revenues by around R6 billion, Schoeman believes it could be lower.<\/p>\n
\u201cTreasury wouldn\u2019t want me to say this\u2026 However, it\u2019s a yes. They do have space and flexibility to pause the fuel levy or continue the relief for even three months [April, May and June]. Based on Citi\u2019s estimates this could cost them between R10 billion and R12 billion for this period,\u201d she said.<\/p>\n
Listen\/read:
SA fuel surcharges and supply struggles
Fuel levy cut announced as workers feel the pinch
Treasury bets on export earnings from gold to offset higher oil imports
SA sees little scope to ease fuel-price shock [18 March]
Godongwana sounds alarm over oil spike<\/p>\n
\u201cI am not suggesting they should extend this for three months, but they do have the room to do so. They could even spread it out [keep the relief measure in place for longer, but at a reduced level of support],\u201d added Schoeman.<\/p>\n
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When Finance Minister Enoch Godongwana jointly announced the temporary fuel levy relief on both petrol and diesel with Gwede Mantashe\u2019s Department of Mineral Resources and Energy (DMRE) on 31 March, he said it would be in place until 5 May.<\/p>\n
\u201cI am still discussing what we can do for the next two months,\u201d Godongwana told Bloomberg at the time.<\/p>\n
However, with the oil price remaining elevated and volatile, the country can expect a further hike in fuel prices in May.<\/p>\n
According to Stanlib economist Kevin Lings, the average month to date under recovery in SA petrol prices is around R2.79\/l and around R8.50\/l for diesel.<\/p>\n
\u201cWe need the war to end [beyond the ceasefire] to get a reduction in fuel prices, but the\u00a0average under recovery for petrol and diesel is getting better each day [with lower oil prices and a relatively stable rand currently],\u201d he said.<\/p>\n
Read:
Don\u2019t write off oil and gas exploration in SA \u2013 Tau
Sarb ties SA rate path to Iran war timeline
Mantashe wants to ramp up local fuel refining capacity, but has that boat sailed?
Iran conflict clouds South African economic outlook, Sarb says<\/p>\n
#Treasury #space #extend #fuel #levy #relief #Citis #Gina #Schoeman<\/p>\n","protected":false},"excerpt":{"rendered":"
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