Austerity TIME: Worsening budget deficit confirmed in MTBPS

It may not be unexpected to economists, but the deteriorating budget deficit confirmed by the Minister of Finance means austerity time for the country, reports The Citizen.

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Speaking at his 1 November 2023 Medium Term Budget Policy Statement (MTBPS), Finance Minister Enoch Godongwana confirmed the country’s budget deficit has worsened by 4.9% since his 2023 budget speech back in February.

BUDGET DEFICIT CONFIRMED

What does that mean for ordinary South Africans? Well, the country’s public finances are significantly weaker than anyone anticipated. After his main budget speech in February 2023, it turned out Gondongwana’s estimations were R54.7 billion out! That represents a worsening of 4.9% of South Africa’s gross domestic product (GDP). Various factors are to blame for poor economic performance, of course, like load-shedding, etc …

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How the Finance Minister plans to deal with the “significantly weaker public finances” is through an ongoing prudent stance of fiscal consolidation, reports BusinessLive. The country is facing a R57 billion shortfall this year and needs to make good spending cuts of roughly R213 billion over the next four years. Projected revenue shortfall over the next three years is expected to hit R178 billion.

NO STATE-OWNED BAILOUTS

Surprisingly, the minister did not announce any bailouts for any state-owned enterprises. These include the likes of Transnet, Eskom, Denel, the South African Post Office (SAPO) and SAA. Instead, he promised deep cuts to government structures to help reduce spending – in excess of R213 billion over four years, as mentioned.

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Worryingly, South Africa’s debt-servicing costs as a share of overall revenue will have to increase to 22.1%, up from the current 20.7% (in 2023/2024). The Minister explained big strides have already been made in saving, and spending has been revised down by R21 billion for the current financial year.

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In terms of major announcements, R24 billion has been set aside for 2023/2024 public sector wage increases. However, these will only be for key departments such as education, health and police services. Also, the SASSA Social Relief of Distress (SRD) grant had been extended for another year at an additional cost of R34 billion.

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What do you think of South Africa’s growing budget deficit? Cause for concern or understandably considering all the problems the country has faced of late? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on X and The South African on Facebook for the latest updates.

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