2021 Budget paints rosier picture than October 2020 MTBPS
Pretoria - The 2021 Budget painted a rosier picture than the October 2020 Medium Term Budget Policy Statement (MTBPS) as revenue growth has been stronger than expected in part due to higher commodity prices recently.
This meant that the contraction in 2020 has been revised to 7.2 percent from October’s 7.8 percent, while the higher revenue in 2020/21 means that tax revenue projections are higher than the 2020 MTBPS estimates by R85.6 billion in 2021/22, R65.5 billion in 2022/23 and R45.3 billion in 2023/24.
This allowed the Treasury to suspend R40 billion in tax increases, which will boost economic activity, while debt issuance will be reduced, helping the capital market.
R10 billion will be allocated for free vaccines against Covid-19, which should allow South Africa to return to normal economic activity some time next year.
That is also why individuals will get tax relief of R13.4 billion as tax brackets are adjusted higher by some 4 percent, which is more than the 3.3 percent inflation rate of 2020.
The 2020 Budget forecasts that revenue will grow by 11.6 percent in 2021/22 after a 11.0 percent reduction in 2020/21, while expenditure falls by 1.6 percent after a 12.6 percent jump.
The public sector wage will be reduced by early retirement of public servants. Ordinary public servants can take early retirement at age 55, while teachers can take early retirement at age 45. In 2019 the expectation was that the early retirement programme would reduce the public sector head count by some 30,000, but as of the end of 2020 only a tenth of this reduction has been achieved.
This is why the reduction in the civil service wage bill remains a government priority. Compared with the 2020 Budget, main budget non-interest expenditure will be reduced by R264.9 billion, or 4.6 percent of GDP, over the next three years.
Debt service costs on the other hand will continue to escalate with debt service costs rising to R338.6 billion in 2023/24 from R162.6 billion in 2017/18.
BUSINESS REPORT ONLINE