Proposals to narrow budget deficit from 4.5% to 4% by 2022

Wednesday, February 20, 2019

National Treasury says government is committed to narrowing the budget deficit and stabilising debt over the next three years.

To do this -- against a backdrop of a GDP revised downwards by 0.2% to 1.5% and the need to address the large risk posed by Eskom -- National Treasury said fiscal consolidation measures were needed to narrow the budget deficit to 4%.

“The 2019 Budget proposes large-scale expenditure reprioritisation and tax measures that narrow the deficit from 4.5% of GDP in 2019/20 to 4% by 2021/22. Gross national debt is projected to stabilise at 60.2% of GDP in 2023/24,” Treasury on Wednesday. 

At the time of the 2018 Medium Term Budget Policy Statement, a total of R33.4 billion was reprioritised over a three-year period to support policy priorities, including the President’s economic stimulus and recovery plan, and some non-discretionary and infrastructure spending pressures.

At the time, the changes did not affect the expenditure ceiling.

Spend revised upwards for the next three years

Relative to the October 2018 budget, National Treasury said the 2019 Budget’s proposed adjustments to spending plans will affect the expenditure ceiling.  

Tabling his Budget Speech on Wednesday, Finance Minister Tito Mboweni said since October’s medium term budget, government has taken steps to adjust baseline expenditure downwards by a total of R50.3 billion over the next three years.

He said half of these reductions come from adjustments to government’s spending on compensation.

“R12.8 billion comes from measures to reduce spending on specific programmes. Provisional allocations are made for the financial support to Eskom and the Infrastructure Fund.

“This offsets the baseline reductions and as such, the expenditure ceiling is revised upwards by R16 billion over the next three years,” he said.  

Mboweni said State-owned entities (SOEs) posed very serious risks to the fiscal framework.

He said funding requests from SAA, SABC, Denel, Eskom and other financially challenged SOEs have increased, with several requesting State support just to continue operating.

“Isn’t it about time the country asks the question: do we still need these enterprises? If we do, can we manage them better? If we don’t need them, what should we do?” –