PRETORIA – Finance Minister Tito Mboweni said on Wedneday that the government was committed to fiscal sustainability, maintaining an expenditure ceiling and stabilising debt without introducing fiscal measures that could limit growth.
In his maiden Medium-term Budget Policy Statement to Parliament, Mboweni said the expenditure ceiling remained intact as funds would be reprioritised to manage pressure and support economic recovery, allowing for real non-interest spending growth of 1.9 percent per year over the medium term.
The government faces pressing liabilities such as increasing gross national debt, above inflation public wage increases and continued bailouts of some troubled state-owned companies.
Mboweni said there was little room for large fiscal adjustments following years of slow spending growth and tax increases, and that a R49 billion revenue shortfalls had contributed to some slippage in fiscal projections.
He said retaining national departments' compensation ceilings implied continued restrictions on personnel budgets and public employment.
The wage bill remains the biggest cost pressure on the budget, with a roughly 85 percent increase due to higher wages rather than headcount increases.
"Government is committed to its goal of stabilising and bringing down the debt-to-gross domestic product (GDP) ratio. In recent months, the deteriorating economic performance, revenue shortfalls and weaker rand have all contributed to higher debt projections," Mboweni said.
"Other risks identified in the February 2018 Budget have materialised, including a public-service wage agreement significantly above inflation, and the continued decline in the financial condition of some state-owned copanies, leading to requests for budget support."
The National Treasury projected that the national debt would stabilise at 59.6 percent of GDP by 2023/24 while the budget deficit would narrow from 4.2 percent of GDP in 2019/20 to 4 percent in 2021/22.
Mboweni reiterated government's commitment to macroeconomic stability and prudent fiscal management, adding that sustainable public finances, inflation targeting and a flexible exchange rate provided a platform to attract investment and absorb external shocks.