The budget deficit is expected to widen to 6.2% of the Gross Domestic Product (GDP) in 2020, National Treasury said on Wednesday.
According to Treasury’s Budget Review document, this is mainly due to tax revenue shortfalls, lower economic growth and the Eskom bailout.
“In 2019/20, the main budget deficit is estimated to widen to 6.2% of GDP compared with the 2019 Budget estimate of 4.7%, mainly due to lower nominal GDP, tax revenue shortfalls and financial support for Eskom.
“Over the next two years, lower revenue, additional financial support for Eskom and higher debt-service costs widen the main budget deficit by an average of 2.2 percentage points,” National Treasury said, adding that the primary balance will narrow over time, reaching 1.4% of GDP in 2022/23.
“Provision for financial support for Eskom in the current year and over the medium term amounts to R161 billion.
“Excluding these provisions for Eskom, the main budget primary deficit improves by 0.9 percentage points to 1.4% of GDP in 2019/20, and narrows to 1.1% of GDP in 2022/23,” Treasury said.
National Treasury said, meanwhile, that gross loan debt is expected to increase from R3.2 trillion or 60.8% of GDP in 2019/20 to R4.5 trillion or 71.3% of GDP in 2022/23, mainly to finance the budget deficit.
“The key drivers of this increase remain the budget balance and fluctuations in the interest, inflation and exchange rates,” Treasury said.
While government remains committed to fiscal sustainability, there has been significant fiscal deterioration since the tabling of the 2019 Budget.
“This requires substantial spending reductions to stabilise debt. Measures to manage and reduce public-sector pressures and risks will be implemented over the medium term.
“Fiscal policy and the debt management strategy will work to mitigate risks to the outlook,” Treasury said. – SAnews.gov.za
