Deputy DG denies Treasury presented ‘austerity budget’
● Treasury officials on Friday brushed aside accusations that sticking to fiscal consolidation in the medium-term budget was hurting core public services, and that the government did not provide enough for households in need.
A delegation led by acting director-general Ismail Momoniat briefed parliament’s joint standing committee on finance and select committee on finance to respond to submissions received by the legislature on the revised fiscal framework.
Civil society groups, trade unions and other formations criticised the government’s insistence on sticking to fiscal consolidation and budgeting for a primary surBy plus. They were also critical of the announcement by finance minister Enoch Godongwana that government is in discussions to absorb two-thirds of Eskom’s R400bn debt.
Edgar Sishi, the deputy director-general in the Treasury’s budget office, said they disagreed with the view that they had presented an austerity budget. He said over the medium term, revenue improvements would be split evenly between reducing debt and service delivery.
“We have sought a balance between the need to ensure that service delivery and economic growth-enhancing measures are prioritised. At the same time we don’t expose ourselves to negative economic outcomes due to imprudent or adventurous fiscal policies. We fundamentally disagree with the view that this is an austerity budget,” he told MPs.
Sishi said no budget cuts were announced in the medium-term budget policy statement for 2022/2023 beyond those announced in 2021. “Additional spending in critical areas is made,” Sishi said.
Government debt is projected to stabilise at 71.4% of GDP — or R4.7-trillion — in this financial year.
This week, civil society groups criticised Treasury for ignoring harsh economic realities by being too focused on fiscal consolidation. In his medium-term budget speech on October 26, Godongwana projected a consolidated fiscal deficit of 4.9% of GDP in 2022/23, and a primary fiscal surplus of 0.7% in 2023/24. However, the Wits University-based Public Economic Project said this week these figures were “unrealistic” as they were based on short-term gains from the commodity boom. The International Monetary Fund voiced similar sentiments.
Responding to the criticism on Friday, Sishi said Treasury could not commit to extra spending if there were no new revenue streams: “This ignores the fact that permanent increases in spending would be matched by permanent increases in revenue. In other words, new revenue sources must be found to fund permanent increases in spending.”
He said greater spending would not automatically result in growth, and highlighted structural economic issues such as loadshedding and a mismatch between labour supply and demand. He said Treasury had targeted spending in areas such as construction, which had the potential to be employment-generating.
“It’s not just about putting money into those things, it’s about the quality of the spending,” Sishi said.
Cosatu’s Matthew Parks said nearly all budget increases were far below inflation, including the decision to keep the R350 social relief of distress grant until March 2024. “The real approach is to plug the holes in government, reduce the money we lose to corruption and wasteful expenditure, to rebuild Transnet and Eskom and other SOEs, and municipalities, to stimulate the economy.”