Cape Town - A sharp deterioration in revenue collection and further downward revisions to economic growth projections have significantly eroded government’s fiscal position.
That was quite evident from Finance Minister Malusi Gigaba's Medium-term Budget Policy Statement, which be called a "candid one".
Tax revenue is projected to fall short of the 2017 Budget estimate by R50.8bn in the current year, the largest under-collection since the 2009 recession. At the same time, additional appropriations of R13.7bn have been agreed to forestall calls against guaranteed debt by the creditors of South African Airways (SAA) and the South African Post Office (SAPO).
These are partially offset by use of the contingency reserve, as well as projected underspending. The expenditure ceiling could however still be breached by R3.9bn in the current year.
The mini budget shows the economic outlook has deteriorated significantly since the beginning of the year. Gross tax revenue for the 2017/18 – 2019/20 period is projected to fall short of the 2017 Budget estimates by R209bn.
The consolidated budget deficit will widen to 4.3% of gross domestic product in 2017/18, against a 2017 Budget target of 3.1% of GDP. Gross national debt is projected to reach over 60% of GDP by 2022, with debt service costs reaching 15% of main budget revenue by 2020/21.
Gigaba said the disposal of assets to offset these appropriations during the current year is under consideration. At a press conference just before he delivered the speech, he and Deputy Finance Minister Sfiso Buthelezi stressed partnerships with the private sector to jointly run state companies by selling parts of them to the private sector. A list of assets that can be disposed of will apparently be ready by March next year.
Additional risks to the medium-term framework include more financial demands from state-owned companies, public service compensation pressures and new spending commitments, particularly in higher education.
A presidential task team is considering a range of steps to bring public finances back onto a sustainable path. Announcements will be made at the time of the 2018 Budget.
Gigaba said he would meet with representatives from the rating agencies right after the mini budget speech this afternoon to discuss the fiscal situation. He would not comment on what the agencies' reaction would be, only “that we will explain the situation to them”.
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