Supplementary Budget 2020

SA fiscus at a crossroads, difficult choices must be made – Treasury official

Government will have to make difficult decisions on state owned companies and the public sector wage bill, members of Parliament (MPs) heard.

A delegation from Treasury briefed the standing committees on finance and appropriations on Friday. They responded to public comments submitted earlier in the week.

Acting deputy director-general for Treasury's budget office Ian Stuart specifically addressed issues relating to debt management and unpacked government's options. Civil organisations, researchers and unions warned against SA approaching a fiscal cliff as this would force the country to seek a loan from the International Monetary Fund.

Treasury projects debt to peak at 60% of GDP by 2023/24. Stuart said that there was little room for additional tax increases, spending cuts and reprioritisation of funds.

"We believe we are at a crossroads which represents many difficult choices we will have to take. One of those choices is how we manage state-owned companies and the other difficult choice is how to manage the growth of the [public] wage bill in the medium term," Stuart said.

To protect the expenditure ceiling, Treasury believes that there should be reforms in state-owned enterprises and interventions for the wage bill. He emphasised that introducing a fiscal rule – to contain debt – will be limited in its effectiveness as there were other underlying problems such as SOEs and the growing wage bill that must be addressed.

"If we implement a debt ceiling without coming to terms with solving expenditure pressures (such as SOEs and the wage bill) then the debt ceiling will cause harm," he explained. However, Treasury is open to discussion on fiscal rules. "We are open to discussion, it is complex and not straight forward," he said.

"We are in a tight fiscal situation. We want to find balance between stabilising debt and not closing the deficit too rapidly which could harm service delivery and growth," Stuart said.

* Visit Fin24's 2018 mini budget hub for all the news, views and analysis.

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