Gordhan pours cold water on Patel’s bond idea

Finance Minister Pravin Gordhan yesterday dismissed suggestions that the government needed a development bond — mooted by Economic Development Minister Ebrahim Patel — to finance its national budget.

This leaves open the question of whether a development bond could be used for off-budget financing to promote economic growth.

Gordhan’s reply to a parliamentary question appeared to demolish one of the key proposals of the strategic plan for Patel’s department released last month. The strategic plan proposed that funds for development could be raised by requiring that pension funds invest 5% of their investible funds in an appropriate mechanism, possibly a government- issued development bond.

Last night Treasury spokeswoman Lindani Mbunyuza said the Treasury was “in constant contact” with the economic development and other departments to consider various funding options.

Five percent of these funds — about R700bn in private sector retirement funds and about R800bn in the Public Investment Corporation — would amount to an estimated R70bn.

Source: Business Day