On the eve of Mboweni’s medium- term budget policy statement, the parliamentary budget office (PBO) has forecast that the national budget deficit will reach 4% of GDP this year, compared to National Treasury’s estimate of 3.6%.
The PBO’s estimate is in line with that of Moody’s and is based mainly on lower than expected growth for the current financial year. It also made a more pessimistic forecast of the level of debt as a percentage of GDP, predicting that it would reach 52.2% in 2020/2021.
It told Parliament’s standing committee on finance that optimism about global recovery had been replaced with uncertainty, and emerging markets were feeling the impact of recent sharp downturns in the exchange rate.
However, in terms of revenue collection, the picture was looking better for South Africa than expected.
PBO officials raised a number of questions about the government’s stimulus package and its potential impact on the economy, saying there was scant detail on the planned allocations and whether government spending on this would be “deficit neutral”.
Mboweni’s speech comes ahead of the much anticipated Investment Summit, led by President Cyril Ramaphosa.
Economist Professor Bonke Dumisa said Moody’s would be monitoring Mboweni’s maiden speech, particularly if it reflects the economic depression South Africa was facing.
“If we increase the Budget in terms of the money we push out without being sure that we increase our revenue, then we are doomed,” he said.
Dumisa said that instead of the Treasury allocating more money, Mboweni should make use of conditional grants that departments had returned to the Treasury after failing to spend it to boost the economy.
Standard Bank chief economist Goolam Ballim said Mboweni’s speech should reflect on debt stabilisation.
“He will have to enhance the quality and efficacy of public spending. I suspect he will highlight the swelling labour-cost component,” he said.
Political analyst Protas Madlala said that currently there wasn’t much that Mboweni could do to address the problems facing state-owned entities (SOEs) until all investigations were able to quantify the damage caused by state capture.
“It he dwells too much on the SOEs he might be interfering with the process, as very few people have testified,” Madlala noted.
He said the government should start appointing people with skills to run municipalities.
African Christian Democratic Party MP Steve Swart urged Mboweni to stick to the strict fiscal consolidation path required to rein in the spiralling public debt levels, and instil confidence in investors and rating 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 rein in the spiralling public debt levels, and instil confidence in investors and ratings agencies,” he said.
IFP spokesperson and MP Mkhuleko Hlengwa said Mboweni should cut down on ballooning public sector wages and all the “nice-to-have” perks for ministers and their deputies, “and review the ministerial handbook to ensure austerity measures are implemented”.
David Maynier of the DA said: “I expect that the fiscal deficit will be pushed up and that national debt will increase, with costs increasing over the medium term.”