South Africa’s Medium-Term Budget Policy Statement: Questions remain regarding implementation of economic reforms

SOUTH AFRICA - Report 29 Oct 2020 by Iraj Abedian

Finance Minister Tito Mboweni tabled South Africa’s Medium-Term Budget Policy Statement (MTBPS) yesterday, just four months after the country’s Supplementary 2020 Budget was presented on the back of rapidly evolving budgetary requirements because of the Covid-19 pandemic. There has been a keen interest in the outcome of the MTBPS, especially to see whether the announced plans of changing the trajectory of South Africa’s public debt would be substantiated.

This was Minister Mboweni’s third MTBPS since taking up the job in late 2018, and between then and now, the Minister has been trying to turn the country’s deteriorating fiscus around. This had already proven to be a challenging task, but the onset of the Covid-19 pandemic as well as its implications for the budget have made this an even more daunting task. First and foremost, the "great lockdown" has had a devastating impact on economic growth, with the National Treasury now forecasting real GDP to contract by 7.8% in 2020 from the already low Budget 2020 (February 2020) growth forecast of 0.9%. As such, the tax base is going to be eroded even more. Secondly, the government has had to offer extensive fiscal support during the crisis, and it has done so to the tune of R500 billion as Minister Mboweni reminded the nation, which placed it at 10% of South Africa’s GDP. Additionally, there are a number of expenditure items that have become increasingly problematic over the years and have been subject to countless attempts at stabilization, with little success.

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