Focus on SACU, capital expenditure
MBABANE - As the countdown to the budget speech by the Minister of Finance, Neal Rijkenberg, continues, economists want more focus on capital expenditure.
The country’s budget speech is set for this coming Friday.
Some economists have suggested that government should spend its revenue to buy, maintain or improve its fixed assets such as buildings, vehicles, equipment and land.
They said the government spent more on recurrent expenditure, which had promoted the leasing of assets instead of buying them.
The experts said government could be saving more if it purchased the motor vehicles they rented as well as improving the procurement system.
“Capital expenditures are long-term investments, meaning the assets purchased have a useful life of five year or more,” they said.
Globally, the International Monetary Fund (IMF) has estimated that the world in 2020 ran a negative general government fiscal balance of 10.2 per cent of GDP (the value of all goods and services produced). In 2021 and 2022, that was forecast to shrink to 7.9 per cent and 5.2 per cent of GDP, respectively.
Real GDP growth was projected to slow to 1.1 per cent in 2022 for Eswatini, reflecting implementation of government’s three-year fiscal adjustment programme and inflationary pressures from the war in Ukraine.
Annual average inflation was projected to increase to 4.8 per cent in 2022 from 3.7 per cent in 2021, driven by high food and fuel prices.
Projected
IMF further projected that the economic growth would weaken significantly in 2023-24, to an annual average of 1.1 per cent, in line with performance in neighbouring South Africa (a major trading partner). Inflation will dip but remain high in 2023, at 5.2 per cent, within the central bank’s target range.
Economist Thembinkosi Mavimbela suggested that the government should focus on the volatile Southern African Customs Union (SACU) receipts, which threaten the revenue of the country as well as tax, which declined exponentially in 2022.
He said SACU was the main contributor to the country’s revenue and a decline could decrease the latter.
Mavimbela said the budget deficit for financial year 2022/23 was projected at 4.8 per cent of the GDP, amounting to E3.8 billion and this deficit was expected to further increase this year.
“The economic destructions caused by the shutdowns and unrest will have an effect in the projections expected this year. This will make it difficult for trade to record growth as expected,” he said.
He further mentioned that the businesses owing Eswatini Revenue Service (ERS) added to the challenges faced by the local business sector.
The government has been running persistent fiscal deficits, while SACU remains the main source of revenue for Eswatini. This was as a result of volatile SACU receipts causing large swings in revenue collection, coupled with inadequate response in government expenditure controls.
Declined
In the last financial year, SACU receipts declined from E6.38 billion in 2021/22 to E5.82 billion in 2022/23, which is equivalent to 8.88 per cent in the current year.
In the previous quarter, E 2.9 billion was received from SACU receipts compared to E3.2 billion in the year 2021/22. This reflected the decrease of SACU receipts expected this year when compared to last year.
Worth noting, Botswana’s budget speech was delivered a few days ago by Peggy Serame, who is the first female Minister of Finance and Economic Development in that country.
In her speech, she highlighted that the Transitional National Development Plan (TNDP) was of strategic significance and was guided by digital transformation, business environment reform, infrastructure development, value chain development, sustaining livelihoods and climate change.