Budget 2023
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SOE spending spree lifts borrowing

Pretoria - The public sector borrowing requirement (PSBR) continues to be higher than the total borrowing by general government, reflecting the capital expenditure programmes of the state-owned enterprises.
 
In many cases, it makes more sense to compare SA’s PSBR internationally rather than with the government deficit, as countries such as Britain and the US don’t have many state-owned enterprises.

As a percentage of gross domestic product (GDP), the PSBR will be 10.1% this fiscal year – down from a budgeted 11,8%.

This is high, but still lower than the 12%-plus levels seen in countries such as the US, the UK, Greece and Ireland before their austerity programmes began.
 
The PSBR will stay high next year, declining to 9.2% of GDP, then 7.7% in the next fiscal year and finally 6.1% of GDP in 2013/14.
 
The medium-term budget says borrowing by the non-financial public enterprises, such as Transnet and Eskom, will continue to support their capital programmes.

Both public enterpirses and development finance institutions need to operate on a financially sustainable basis.
 
An issue that received a great deal of attention during the eurozone sovereign debt crisis and also during concerns about the US fiscal situation is debt as a percentage of GDP.

Greece had debt of about 121% of GDP at its worst.

The Treasury estimates that debt stock will stabilise at about 40% of GDP in 2015/16. The actual outcome will depend largely on the pace of economic growth.

The probability of debt stock breaching 50% of GDP remains relatively low.

“While this illustrates the underlying strength of the fiscus, it also highlights the constraining effects of high fiscal deficits and lower GDP growth on future expenditure.”

The structural budget balance strips out cyclical revenue to provide an estimate of what the budget deficit would be if the economy was performing at its long-term potential growth rate.

The balance is calculated by subtracting estimated structural expenditure from structural revenue.

After removing the effects of the economic cycle on revenue, consolidated structural budget revenue in 2010/11 is about 29% of GDP, resulting in a structural budget deficit of about 4.1% of GDP.

This is lower than the actual budget deficit of 5.3% of GDP.

 - Fin24

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