Tabling his mini-budget in Parliament on Wednesday, Finance Minister, Tito Mboweni, said the economy was forecast to grow by 1.7% and 1.5% respectively, in the next financial years.
The Finance Minister said the stock of gross debt is expected to rise from roughly R4-trillion rand this financial year, to R5.5 Trillion in the 2022/2023 financial years.
In short, the SA government is running out of money with revenue from taxes falling far short of the continuing increase in government expenditure.
Mboweni said in his budget speech that “we cannot allow our recent fiscal weakness and the pandemic to turn into a sovereign debt crisis”, saying that “today the government sets out active measures to avoid this risk”.
“We table a five-year fiscal consolidation pathway that promotes economic growth while bringing debt under control,” said Mboweni.
The major problem remains the global recession brought on by the Covid-19 pandemic and the uncertainty of economic recovery.
Mboweni spelt it out clearly: “Madam Speaker, we must be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year. Countries that find themselves in default see sharp GDP contractions and currency depreciations.
“On current trends, more of our taxes are being transferred to bondholders, rather than to critical services for our people. An uncontrolled increase in borrowing costs would harm small businesses, ordinary South Africans, and the poor the most.”
The budget shows that Treasury has reduced its estimates of revenue from taxes significantly for each of the next three years compared to previous projections.
For more on Mboweni's budget speech visit Moneyweb.
