Budget deficit set to worsen

Johannesburg - South Africa's fiscal gap could widen further after finance ministry figures showed government expenditure had soared while tax collections were much lower compared to last year.

The data released by the National Treasury on Monday showed tax collections for the first eight months of the 2009/10 fiscal year were R26bn lower than the same period in the previous year.

Finance Minister Pravin Gordhan has said tax revenue for the 2009/10 fiscal year would likely undershoot the target by about R70bn.

In October, the treasury forecast a record budget deficit of 7.6% of gross domestic product in the 2009/10 fiscal year, but analysts say it could be higher.

"The R26bn shows government coffers are still under pressure given that households and companies continue to feel the pinch," said Jeffrey Schultz, macro strategist at Absa Capital.

"While we see evidence of mild economic recovery, that recovery is likely to be slow and put pressure on government revenue for some time ... There's a risk to the upside in terms of them revising the budget deficit up."

South Africa emerged from its first recession in 17 years in the third quarter after three quarters of contraction. The recession slashed company profits and led to about a million job losses.

The National Treasury figures also showed expenditure in the period climbed to R489.5bn compared with R403.2bn in the previous fiscal year, as the government sought to counter the recession with increased spending.

- Reuters