Highlights: Medium-Term Budget Policy Statement in a nutshell
Here are some highlights of the Medium-Term Budget Policy Statement (MTBPS) presented on 26 October by Finance Minister Enoch Godongwana. Strategy/goals: The MTBPS aims to reduce fiscal risks in the short term, narrow the budget deficit and stabilise debt. It also proposes measures to enhance economic growth and restore funding for infrastructure and service delivery programmes.
Debt: Gross loan debt is seen stabilising at 71.4% of GDP in 2022/23. Net loan debt is forecast to stabilise at 69% of GDP in 2024/25. Gross loan debt is expected to increase from R4.75-trillion in 2022/23 to R5.61-trillion in 2025/26.
BUDGET DEfiCIT/SURPLUS: The consolidated budget deficit is seen narrowing from 4.9% of GDP in 2022/23 to 3.2% of GDP in 2025/26. Along the way, in 2023/24, a primary budget surplus of 0.7% of GDP is expected, which would be the first such surplus in 15 years. There will still be a budget deficit, but revenue in this scenario would exceed non-interest spending, an accounting sleight of hand.
BORROWING: Long-term borrowing in the domestic bond market will decline from R330.4-billion estimated in the 2022 Budget to R299.4-billion in 2022/23.
REVENUE COLLECTION: The MTBPS says revenue collection has exceeded projections across most major tax categories. In the current year, the government will use 65% of this projected additional revenue to improve its primary balance, followed by 45% in 2023/24 and 37% in 2024/25. Tax revenues are expected to increase to R2.04-trillion, or 25.4% of GDP, by 2025/26.
DOMESTIC ECONOMIC GROWTH PROJEC
TIONS: Economic growth in 2022 has been revised down to 1.9% from 2.1% previously. GDP growth is expected to average 1.6% over the medium term.
SPENDING: Over the medium term, 59.2% of consolidated non-interest spending goes to the “social wage” – combined public spending on health, education, housing, social protection, transport, employment and local amenities. Medium-term spending increases are targeted to increase the number of teachers and police, retain health workers and improve critical water, road and rail infrastructure.
The South African National Roads Agency Limited (Sanral) will spend R61.8-billion on building new road infrastructure and rehabilitating key transport routes serving the economy. The Passenger Rail Agency of South Africa plans to spend R23.6-billion on rehabilitating vandalised and stolen rail infrastructure and to continue the modernisation programme, which includes renewing the fleet of rolling stock.
STATE-OWNED ENTERPRISES: The government is allocating R30-billion to Denel, Sanral and Transnet in the current year.
The statement notes that the Land Bank remains “in financial distress” and R5-billion remains in the contingency reserve in 2022/23 as part of the funding provided for it in the previous budget.
There are plans to provide debt relief to Eskom to address the utility’s liquidity challenges. This includes taking over a portion of its almost R400-billion debt.