Finance Minister Tito Mboweni unveiled his Budget for the coming fiscal year, and the outlook isn’t pretty.
Treasury has cut economic growth forecasts, plans to reduce state spending and won’t provide tax relief for citizens as it seeks more funds to prop up debt-laden state-owned companies, including yet another record bailout for power utility Eskom, which last week struggled to keep the lights on.
The National Treasury forecast a fiscal gap of 4.5% of gross domestic product for the year starting April 1. If realised, it would be the worst since the 6.3% reported in fiscal 2010, and bigger than the estimate in a Bloomberg survey.
The Treasury reduced the forecast for expansion in gross domestic product this year to 1.5% from 1.7% estimated in October, and cut growth predictions for the next two years. The economy that hasn’t expanded by more than 2% since 2013.
Forecasts for gross debt as a percentage of GDP are worse than the October estimates for every year through 2027, with the figure expected to stabilise at 60.2% in 2023-24 compared with the prior prediction of 59.6% for the same year. The slippages come as the Treasury provides a R23bn lifeline to loss-making power utility Eskom in each of the next three years.
The fastest-growing expenditure item in the Budget is debt-servicing costs, with the country spending R182.2bn in fiscal 2019, rising to R247bn by 2022. South Africa is “borrowing about 1.2bn rand a day, assuming we don’t borrow money on the weekend,” Mboweni said.