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Cape Town - If Finance Minister Nhlanhla Nene’s mini budget is business as usual, there will be very little hope for the 8.4 million people who do not have jobs, according to the Democratic Alliance (DA).
However, DA shadow minister of finance David Maynier said on Monday that it is difficult to see how Nene will narrow the budget deficit, stabilise public debt and rebuild fiscal space.
With economic growth projections likely to be revised down to 1.5% in 2015/16, the consolidated budget deficit is projected to be R162.2bn, or 3.9% of gross domestic product (GDP), in 2015/16, said Maynier.
Added to that, debt has ballooned with gross domestic debt now projected to be R1.98trn, or 47.3% of GDP, in 2015/16, the DA Member of Parliament said.
“Debt service costs are the fastest growing expenditure item on the budget,” he said. “We will spend R420bn on servicing debt between 2015/16 and 2017/18, which is, staggeringly, nearly double the education budget for 2015/16.
“The situation is so acute that, with a primary budget deficit of R29.7bn, we will have to borrow in order to pay the R132.4bn projected interest payment in 2015/16.
“The R12.6bn public sector wage agreement wiped out the R5bn unallocated reserve and has left the minister scrambling to finance the R7.6bn shortfall from projected savings and under-spending in 2015/16."
Maynier said the ratings agencies will be watching Nene “like hawks and even a whiff of fiscal slippage may cause a sovereign rating downgrade, which will increase borrowing costs”.
S&P left the country’s credit rating at BBB- with a stable outlook this year, but this is only one step away from junk status.
Moody’s had a slightly more optimistic outlook with a credit rating of Baa2, with a stable outlook. It said in May that it took into account load shedding and growth challenges, and that the rating will probably remain unchanged for the next 12 to 18 months.
