A handful of rand notes. Picture: Karen Sandison/ANA

PARLIAMENT - Finance Minister Malusi Gigaba on Wednesday said Treasury's contingency reserve would be cut down to R16 billion over the next three financial years.

In his maiden medium-term budget policy statement (MTBPS), Gigaba said the paring down of the reserve funds to R3 billion for 2017/18, R5 billion in 2019/20 and R8 billion in 2020/21 would help offset revenue shortfalls.

"This leaves government with little room to manoeuvre should risks to the expenditure ceiling materialise," the MTBPS said.

In his speech, Gigaba announced other measures to counter the revenue shortfall, including "a mix of expenditure cuts and revenue increases". He did not give details, saying these would be announced in the main budget in February next year.

The spending cap set by government would remain in place.

"New spending priorities will have to be met by funds reallocated from within existing limits. Any adjustments to the ceiling itself would need to be matched by revenue increases," said Gigaba.

Gigaba did warn that the expenditure ceiling was threatened in the current financial year by government bailing out South African Airways and South African Post Office.

- African News Agency (ANA)