South Africa’s Medium-Term Budget Policy Statement presents a slightly better fiscus, but it may be only a temporarily relief

SOUTH AFRICA - Report 12 Nov 2021 by Iraj Abedian

Having been contending with the Covid-19 pandemic for over a year and a half, the South African government, like most governments globally, has been juggling countless needs pressing on its coffers, while at the same time attempting to contain public debt to eventually bring it down to prudent levels. The pandemic era’s second Medium-Term Budget Policy Statement (MTBPS) was presented yesterday, with the first one (presented in October 2020) having been quite bleak - at the time forecasting elevated revenue under collections and an escalation in the country’s debt. Giving an update on government finances since the presentation of the country’s main Budget (in February), the Medium-Term Budget Policy Statement is tabled annually by the Finance Minister to outline government’s fiscal priorities over the medium term, i.e., the next three years.

With just over three months on the job, new Finance Minister Enoch Godongwana presented today’s MTBPS. Minister Godongwana was appointed by President Cyril Ramaphosa following the resignation of former Finance Minister Tito Mboweni. Minister Godongwana has since assured the nation and investors that he would continue on the path of fiscal consolidation that the National Treasury had been on under his predecessor. Indeed, fiscal continuity in terms of prudent management of public funds is of vital importance as the country’s finances, in addition to undergoing a rapid deterioration during the Covid-19 pandemic, were already on unsustainable path pre-pandemic. The Minister highlighted that this year’s MTBPS serves as testament to government’s commitment to fiscal sustainability, including through the narrowing of the budget deficit and the stabilization of debt.

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