Budget deficit is set to widen

SOUTH Africa’s budget deficit is expected to widen to 4.5% of gross domestic product in the 2019/20 fiscal year from 4.2% in 2018/19, as growth remains subdued and tax revenue weak, the National Treasury said.

The forecasts have deteriorated from last October, when the Treasury forecast deficits of 4% and 4.2% for 2018/19 and 2019/20 respectively.

The shortfall is still expected to stabilise at 4% of GDP by 2021/22.

In his Budget speech to Parliament, Finance Minister Tito Mboweni said revenue in the 2019/20 financial year would amount to R1.58 trillion, against spending of R1.83 trillion.

“That means we will spend R243 billion more than we earn. Put another way, we are borrowing about R1.2bn a day, assuming we don’t borrow money on the weekend,” he said.

The Treasury said the economy’s performance continued to weigh heavily on tax revenues.

It said while the medium-term budget policy statement presented last October had projected a 2018/19 revenue shortfall of R27.4bn, this was now expected to come in at R42.8bn.

Over the medium term, additions to spending amounting to R75.3bn, consisting mainly of transfers to support the reconfiguration of Eskom, would be partially offset by proposed savings from compensation adjustments totalling R50.3bn.

Tax measures would raise an additional R15bn in 2019/20 and R10bn in 2020/21.

The Treasury said total public spending over the three-year mediumterm expenditure framework was expected to be R5.9 trillion.

It increased the expenditure ceiling by R16bn over the next three years, mainly due to provisional allocations for reconfiguring Eskom.

It noted ratings agencies’ concerns about South Africa’s tepid growth, rising debt burden and contingent liabilities, reflected in sub-investment grade ratings from Fitch and S&P Global. |