ACDP MP and spokesman on financial matters, Steve Swart, has urged new Minister Tito Mboweni, to stick to the strict fiscal consolidation path required to reign in the spiraling public debt levels and instil confidence in investors and ratings agencies.
The new Finance Minister, Tito Mboweni, has very little fiscal room to move given the technical recession we have experienced. He will have to stick to the strict fiscal consolidation path announced in February in order to reign in the spiraling public debt levels, and instill confidence in investors and ratings agencies.
The ACDP is expecting the budget deficit to remain below 4% of GDP, projected to be approximately 3.8% of GDP for the present fiscal year. Even at this rate, and with low economic growth of below 1 %, the fastest growing item on the budget is debt service costs, which are set to balloon over the medium term. There is little or no room to increase taxes, with the result that government expenditure must be reduced to reduce the budget deficit.
He will also need to give details as to how to stimulate economic growth, with particular reference to the R50 billion economic stimulus package announced last month by President Ramaphosa - a shift needs to take place from consumption spending (salaries, etc) to infrastructure spending. This will require reprioritisation of government expenditure within the fiscal framework.
Minister Mboweni will also need to give details as to where the R30 billion needed for the increased public sector wage bill will be found. This follows the higher than agreed public sector wage agreement entered into by government. The ballooning public sector wage bill is unsustainable and poses a serious risk to the expenditure ceiling and fiscal consolidation path.
The ACDP does not support further bail-outs to state-owned companies (SOCs), such as SAA. The minister must however announce further measures to stabilise SOCs, particularly Eskom, which present the biggest threat to state finances, given the guarantees that have been issued to them. In this regard, far more urgent steps are needed to address corruption and state capture that occurred during the Zuma administration and recover the estimated R100 billion that has been lost through it.
While it may be very difficult to balance fiscal discipline and populist expectations going into the elections next year, this is very necessary given the poor state of our economy and state of public finances. Strict discipline and a firm hand on the public finances are required. We trust that minister Mboweni will not disappoint us tomorrow.
ISSUED BY: STEVE SWART MP
23 October 2018