Consolidated budget spending to exceed R2 trillion for the first time
JOHANNESBURG – Finance Minister Tito Mboweni on Wednesday projected total consolidated budget spending, including debt service costs, to exceed R2 trillion for the first time.
When delivering the Supplementary Budget, Mboweni said gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to the National Treasury’s initial forecast for the same period of R177.3bn.
“We are already R35.3 billion behind on our 2020/21 target. As a consequence, gross tax revenue for the 2020/21 fiscal year is revised down from R1.43 trillion to R1.12 trillion.
“That means that we expect to miss our tax target for this year by over R300 billion,” he said.
Mboweni said part of this revision was because the measures announced earlier this year give taxpayers outright relief of R26 billion and delays in tax collection of about R44 billion.
"These proposals are contained in the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill that I table today.
“Taken together the measures and adjustments we present translate into a consolidated budget deficit of R761.7 billion, or 15.7 percent of GDP in 2020/21. This is compared to the deficit of R370.5 billion, or 6.8 percent of GDP projected in February.
“This increase is mainly due to the revised revenue projections and pay‐outs from the Unemployment Insurance Fund. The narrower measure, known as the main budget deficit, is projected to be 14.6 percent of GDP.
“Our early projection is that gross national debt will be close to R4 trillion, or 81.8 percent of GDP by the end of this fiscal year. This is compared to an estimate of R3.56 trillion or 65.6 percent of GDP projected in February,” he said.
The minister said without external support, these borrowings would almost entirely consume all the country’s annual domestic saving, leaving no scope for investment or borrowing by anyone else.
“For this reason, we need to access new sources of funding. Government intends to borrow about US$7 billion from international finance institutions to support the pandemic response. We must make no mistake, these are still borrowings. They are not a source of revenue. They must be paid back,” he said.