FILE PHOTO: South Africa’s central bank Governor Tito Mboweni speaks at the Reuters Economist of the Year breakfast in Johannesburg, September 6, 2007. REUTERS/Mike Hutchings/File Photo
October 24, 2018
CAPE TOWN (Reuters) – South Africa’s budget deficit estimates have widened after a recession and revenue shortfalls, Finance Minister Tito Mboweni said on Wednesday in a budget speech that directed spending on infrastructure, manufacturing and agriculture to boost growth.
Mboweni presented the medium term budget policy statement (MTBPS) to parliament as Africa’s most industrialized economy struggles with ballooning debt that risks pushing the sovereign’s credit ratings deeper into “junk” territory.
The Treasury said the budget deficit estimate for the 2018/19 fiscal year is seen widening to 4 percent of GDP from 3.6 percent previously.
The budget deficit is seen rising to 4.2 percent in the next two years, the Treasury said.
The Treasury also halved the growth forecast for this calendar year to 0.7 percent. In the three years to 2020/21, the tax revenue expected to underperform significantly, it added.
South Africa’s fiscal year runs from April to March.
The rand <ZAR=D3> which was half a percent stronger before the budget speech was read out by Mboweni, turned weaker, falling 1 percent. Government bonds also fell.
“Fiscal risks remain elevated over the medium term,” the Treasury said in a statement.
“At a minimum, economic growth of 2.5 to 3 percent is required to sustain current public spending commitment.”
President Cyril Ramaphosa last month announced a stimulus plan that included 50 billion rand ($3.5 billion) of expenditure, a portion of which will be funds shifted from low performance areas, and some new funding.
The Treasury said it would shift 32.4 billion rand in expenditure over the next three years, with nearly half the amount directed to agriculture, infrastructure, clothing and textile incentives and job creation programs.
($1 = 14.3918 rand)
(Reporting by Olivia Kumwenda-Mtambo, Mfuneko Toyana and Wendell Roelf; Editing by James Macharia)
