ACDP concerned about spiralling public debt levels

ACDP concerned about spiralling public debt levels

In response to Finance Minister Mboweni’s Special Adjustment Budget to revise state spending in response to the ongoing health crisis, ACDP MP and Whip Steve Swart, this evening said,

“The minister had no fiscal space to move given that the economy is set contract by 7.5 % of GDP as a result of the hard lockdown, resulting in R300bn less than projected tax revenue.

This results in the budget deficit growing from an already high 6.8% of GDP (R370 5bn) to an enormous R761bn. Debt service costs, which were already crowding out expenditure on other budgetary items, are set to escalate to a staggering R4 trillion or 81.8 % of GDP.

While the ACDP supports additional funding to combat the virus pandemic, it is also necessary to assist struggling businesses and individuals. We welcome the financial assistance in this regard – believing we need to protect lives and livelihoods.

While much of the R500bn relief package will need to come from reprioritised funds and borrowing, the funds must be carefully spent and fully accounted for.

The ACDP supports real time auditing of such expenditure and swift action by the Hawks, NPA and SIU where any irregularities are uncovered.

This particularly given that municipalities, where rampant corruption occurs, are to be given substantial additional funds.

We also support moving to zero-based auditing by the state.

It is also crucial that the spiralling public sector wage bill is addressed. This, together with unacceptable bailouts to SOEs (such as the R3bn to the Landbank and talks of a new airline at substantial cost) are totally unaffordable during this crisis.

The ACDP welcomes the implementation of the Treasury’s Economic Growth strategy. The question is whether Mboweni has the political support to implement the very tough decisions which are necessary to implement this strategy to stimulate economic growth, create jobs and stave off a sovereign debt crisis in the medium term.

Mboweni today repeated his warning that unless public expenditure is cut, the country will face a sovereign debt crisis by 2024, forcing it to seek help from the IMF.

We share these concerns, and trust that his colleagues in government are heeding his warning.

In order to qualify for the release of the Covid-19 relief funds, Treasury will need to present the IMF with a credible fiscal consolidation framework which must show that the country has a plan to stabilise debt over the longer term. The country has entered this crisis on our back-foot, largely as a result of years of looting and plundering of state resources and ill-guided government policies. We look forward to the presentation of such plans.

Lastly, we will be closely studying the financial details contained in the various Bill’s tables today, and as far as possible, exercise due parliamentary oversight over the allocation and expenditure of these additional funds. We require good stewardship and accountability of these funds, much of which must be repaid with interest.”

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