Moneyweb
By Suren Naidoo
Finance Minister Enoch Godongwana and National Treasury firmly committed to fiscal consolidation and reducing South Africa’s budget deficit back to single digits, with the tabling of the 2021 Medium-Term Budget Policy Statement (MTBPS) on Thursday.
This follows the Covid-19 financial fallout last year, and comes despite a revenue windfall this year, largely on the back of more taxes from booming commodity prices.
“Fiscal consolidation is critical to reduce the public debt burden, restore investor confidence and avoid overexposure to global and domestic risks,” declares the MTBPS, Godongwana’s first budget-related tabling in Parliament since being appointed finance minister in August.
“The MTBPS proposes to maintain restraint in public expenditure. Government will not commit to new long-term spending in response to temporary revenue windfalls,” it states.
“Government remains committed to reducing the budget deficit and stabilising the [country’s] debt-to-GDP ratio,” it reiterates.
“Government will use part of the higher tax revenues associated with the recent commodity price surge to narrow the deficit, and to provide short-term [support] to the most vulnerable, and cover the higher costs of the public-service wage agreement,” it adds.
According to the MTBPS, SA’s consolidated budget deficit is expected to narrow from 7.8% of GDP in 2021/22 to 4.9% of GDP in 2024/25.
With eased lockdowns and the ‘opening up’ of the economy in the second half of last year, Mboweni in his February 2021 main budget speech, revealed that the 2020 budget deficit was expected to come in lower at 14% of GDP.
In the wake of the revision of SA’s 2020 GDP data, which now shows a decline of 6.4%, Godongwana confirmed on Thursday that the 2020 budget deficit came in much better, at 10% of GDP.
However, government has committed to cutting the budget deficit further, to half of this figure (10% in 2020) by the end of the MTEF (Medium Term Expenditure Framework) period.
“Over the next three years, spending will remain restrained. To avoid a widening of the budget deficit, changes to spending will be funded through improved revenue performance or through reprioritisation and reviewing existing programmes,” the 2021 MTBPS notes.
“Barring major new shocks or unbudgeted spending commitments, staying the course will lead to a primary fiscal surplus in 2024/25, bringing an end to fiscal consolidation at the end of the MTEF period,” it adds.
Treasury said that this consolidation will be supported by structural reforms to unlock private-sector investment and job creation.
https://www.moneyweb.co.za/in-depth/budget/godongwana-commits-to-fiscal-consolidation/
