If Enoch Godongwana goes too far in tomorrow’s MTBPS, there could be disastrous consequences for South Africa.
South Africa is in an unsustainable financial position, but Finance Minister Enoch Godongwana cutting expenditure too far could have serious implications for South Africa’s stability.
“The commodity price upcycle, which led to a windfall in tax revenues last year, has turned sharply, significantly reducing corporate tax collections.” “Aside from the accumulative contingency reserve and allocated reserve funds of R95.2 billion between FY2023/24 and FY2025/26, which could cater for part of the expected expenditure overrun, the government has proposed a public sector headcount freeze, alongside the potential for outright job cuts and a halt in advertising new procurement contracts for all infrastructure projects, to address the shortfall in revenue collections,” Momentum Investments economists said.
“The market consensus view is for T-bill issuance to play a significant role in financing the larger-than-anticipated budget deficit given the steepness of the yield curve, making T-bills a cheaper funding source relative to fixed-rate, longer-dated government bonds,” Momentum said.
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