National Treasury has issued a framework to help departments use public funds more effectively and deliver better value for money.
With the economy still growing slowly, National Treasury said government must continue to restrain spending growth and focus on priority areas.
The 2027 Medium-Term Expenditure Framework (MTEF) Technical Guidelines are intended to help government reduce South Africa’s high public debt to more sustainable levels and lower interest costs, which currently consume almost one-fifth of tax revenue.
According to National Treasury, the 2027 MTEF is anchored in government’s commitment to stabilise and gradually reduce the debt-to-GDP ratio.
“This means that government must continue to ensure growth in its primary budget surplus, where revenue exceeds non-interest spending by an ever-wider margin, so that it can reduce its borrowing requirement.
“It also means that any urgent new priority spending pressures must be funded in a way that keeps government on track to meet this fiscal objective,” National Treasury said.
The MTEF Technical Guidelines are issued each year in terms of Section 27(3) of the Public Finance Management Act (PFMA). They set out the format and approach departments and public institutions must follow when preparing their budget submissions to National Treasury for the next three years.
“The previous MTEF introduced the Targeted and Responsible Savings (TARS) initiative. This is designed to identify programmes that are not cost-effective, do not deliver on their objectives, or are low priority, and to reduce or close them.
“This will yield savings that can instead be used for higher priority spending and better service delivery. The Programme Assessment Matrix (PAM) was introduced to provide departments with a systematic method to evaluate the performance of each programme,” National Treasury said.
The following principles will guide budget submissions:
- If revenues come in higher than expected in the Budget, such gains will be used only to reduce debt or address temporary spending needs, such as infrastructure investment or urgent spending pressures. They will not be used to fund permanent spending increases.
- Government granted fuel levy relief in response to high oil prices resulting from the current Middle East conflict. The estimated cost of R17.2 billion was funded by lower-than-expected spending and higher-than-expected revenues, so it was fiscally neutral. Any further relief measures would likewise have to be funded in a budget-neutral manner.
- Additions to the overall fiscal envelope will only be considered for priority interventions if savings have been identified through the TARS process.
- Departments must look first to reprioritise money in their existing baselines to address new spending pressures. Programmes that have consistently underperformed must be considered for reprioritisation.
- Departments must use PAM to assess programmes and public entities, and evaluate their effectiveness and performance.
- Compensation budgets must remain within the limits set in the 2026 Budget. This implies that departments will need to manage their overall staff complement to remain within budget.
- Salary adjustments in public institutions should be aligned with the Public Service Wage Bill management strategy.
- National departments must ensure that policy proposals that provinces and municipalities must implement are fully costed and aligned with the fiscal framework to avoid unfunded mandates.
- SAnews.gov.za
