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Cape Town - South Africa cut its budget deficit forecasts on Wednesday, predicting a 4.0% spending gap for 2014/15, lower than market expectations and compared with a 4.1% deficit seen in October.
For the current year ending in March, the new forecast is also 4.0%, lower than the 4.2% seen in October.
The Treasury also lowered its growth forecasts, but said it would contain spending - despite an election looming in less than three months - and collect more tax, partly because of the weaker rand exchange rate.
"The narrower deficit is the result of stronger revenue growth and underspending by national departments, provinces and public entities," it said in its 2014 Budget Review.
Corporate income tax receipts have received a strong boost from the weak rand, which fell to its lowest in five years last month.
Above-inflation wage increases should also result in sustained personal income tax receipts, while strong imports should boost the customs take at South Africa's borders.
However, the Treasury noted that rand also raises the cost of servicing South Africa's debt, which is projected to increase by R5bn from October's estimate.
The weak rand has pushed inflation expectations higher, suggesting a bigger wage bill for the government, which is likely to have to shift money from other areas.
South Africa's deteriorated terms of trade were unlikely to improve over the next three years, the Treasury noted. In the outer years, revenues should dip and track GDP more closely, it added.
Treasury said risks to its sustainable fiscal outlook included economic uncertainty and a new round of public-sector wage negotiations expected to come into effect in 2015.
For the current year ending in March, the new forecast is also 4.0%, lower than the 4.2% seen in October.
The Treasury also lowered its growth forecasts, but said it would contain spending - despite an election looming in less than three months - and collect more tax, partly because of the weaker rand exchange rate.
"The narrower deficit is the result of stronger revenue growth and underspending by national departments, provinces and public entities," it said in its 2014 Budget Review.
Corporate income tax receipts have received a strong boost from the weak rand, which fell to its lowest in five years last month.
Above-inflation wage increases should also result in sustained personal income tax receipts, while strong imports should boost the customs take at South Africa's borders.
However, the Treasury noted that rand also raises the cost of servicing South Africa's debt, which is projected to increase by R5bn from October's estimate.
The weak rand has pushed inflation expectations higher, suggesting a bigger wage bill for the government, which is likely to have to shift money from other areas.
South Africa's deteriorated terms of trade were unlikely to improve over the next three years, the Treasury noted. In the outer years, revenues should dip and track GDP more closely, it added.
Treasury said risks to its sustainable fiscal outlook included economic uncertainty and a new round of public-sector wage negotiations expected to come into effect in 2015.
