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- The expenditure ceiling was breached by R45.2 billion in the current year due to the emergency response by government.
- Minister of Finance Tito Mboweni highlighted the urgent need for South Africa to get to grips with its debt in the medium-term period.
- Main budget non-interest spending is projected to contract as a share of GDP in real terms in the lead up to the 2023-24 financial year.
The medium-term budget policy statement said the expenditure ceiling was breached by R45.2 billion in the current year due to the emergency response by government to the Covid-19 coronavirus pandemic.
Minister of Finance Tito Mboweni tabled the medium-term budget policy statement in Parliament on Wednesday. It was the first medium-term budget policy statement since the advent of the pandemic.
"Main budget non-interest spending has increased by R36 billion in the current year compared with 2020 budget estimates. This reflects net additions made for the Covid-19 relief package, as discussed in the June special adjustments budget," the medium-term budget policy statement said.
The medium-term budget policy statement proposed a downward adjustment to spending by R62.9 billion in 2021-22, by R92.9 billion in 2022-23 and by R150.9 billion in 2023-24. The statement said the reductions would fall mostly on compensation.
"Other non-interest spending items are also reduced while funding for building and other fixed structures, provincial and local capital grants and the Infrastructure Fund is protected," the medium-term budget policy statement said.
Debt
Mboweni highlighted the urgent need for South Africa to get to grips with its debt in the medium-term period, saying that failing to get control of the debt ceiling would plunge the country into a debt crisis.
Minister of Finance Tito Mboweni tabled the medium-term budget policy statement in Parliament on Wednesday. It was the first medium-term budget policy statement since the advent of the pandemic.
National Treasury outlined two scenarios for its baseline economic forecast in its medium-term budget policy statement. In one scenario spending reductions are not implemented and debt servicing costs as a share of revenue increase from 21.2% in 2020-21 to 35% in 2028-29.
"In the current year, short-term borrowing has increased by R95 billion to R143 billion, relative to the 2020 Budget estimate. This is marginally lower than the June estimate," the medium-term budget policy statement said.
In the second scenario, economic reforms strengthen growth and debt stabilises at 92.4% of GDP by the 2025-26 financial year. The medium-term budget policy statement said moderate deviations in the scenario assumption could result in substantially different outcomes.
"Long-term debt redemptions will average about R134.4 billion over the next decade, up from an average of R37.3 billion in the previous ten years. If additional borrowing is required to finance deviations from fiscal targets, it will result in higher redemptions falling due to, creating rollover risk, said the medium-term budget policy statement.
The statement said there would be lower spending by the National Skills Fund and Sector Education and Training Authorities, "reflecting the decline in skills development levy projections".
The statement said main budget non-interest spending is projected to contract as a share of GDP in real terms in the lead up to the 2023-24 financial year, moderating from a peak of 32.4% in 2020-21 to 26.4% by 2023-24.
"Due to a wider deficit, weaker currency and higher interest rates, debt service costs will continue rising over the medium term," the statement said.
The medium-term budget policy statement said it sets out “ambitious” consolidation targets to achieve a primary surplus by the 2025-26 financial year.
