The MTBPS on 30 October will be the first budget after the formation of the GNU. Will it be a good news budget?
Economists are already trying to determine the fiscal pressure points Finance Minister Enoch Godongwana will have to include when he delivers the Medium-Term Budget Policy Statement on 30 October.
“Despite displaying one of the sharpest rates of deterioration in the debt-to-gross domestic product profile, Treasury’s February estimates highlight a faster-anticipated contraction in government’s budget deficit ratio and an earlier stabilisation in the debt ratio compared to developed market and emerging market composites.
However, she says, on 1 October, unions representing 1.3 million government employees rejected the employer’s offer of a 3% increase for the next financial year and asked for 12%. “This far exceeds the 4.5% increase outlined in the February budget, which could push the total compensation bill to approximately R754 billion.”
While debt relief for Transnet similar to Eskom’s debt transfer could facilitate higher capital expenditure, further government support is only expected in the next fiscal year. This is expected to affect government’s budget deficit and debt-to-GDP ratio.Fiscal performance is expected to largely align with the February budget estimates, she says.
“Luckily, this should not be a difficult task as spending pressures seem relatively contained, with Treasury having a tight grip on expenditure. Moreover, a relatively stronger Rand year-to-date and compression of bond yields should offer some savings in the form of lower debt service costs.”
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