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National Treasury released its 2020 Medium Term Budget Policy Statement speech on Wednesday. According to Treasury, the impact of Covid-19 has resulted in steep economic declines and increased public finance expenditure. Amid a global contraction not seen since the 1930s, National Treasury’s focus is on securing economic recovery post-Covid-19. The 2020 Medium Term Budget Policy Statement (MTBPS) therefore prioritises economic recovery and fiscal consolidation in the medium-term. It goes without saying that there were a few surprising twists (yet more money allocated to SAA), but otherwise, it seems that little has changed since the budget allocated in June. – Claire Badenhorst
Faced with surging debt, South Africa sticks to borrowing plans
By Mike Cohen*
(Bloomberg) – South African Finance Minister Tito Mboweni steered clear of increasing borrowing in his medium-term budget, instead announcing spending cuts to offset falling tax revenue.
The National Treasury’s financing plan unveiled Wednesday was little changed from the special adjustments budget announced in June to take account of the devastation wrought by the coronavirus.
- Budget in a nutshell: Tax bill to ratchet up to R15bn as revenue plunges; SOE bail-outs
- Revealed: At least R300bn in tax revenue disappears through job losses, tobacco ban #MTBPS
- Govt spending 36% of GDP – significant reductions needed, says Treasury #MTBPS
- The gross borrowing requirement – the sum of the main budget deficit and maturing loans – is expected to reach R774.7 billion ($47.4 billion) this fiscal year. That’s marginally down from R776.9 billion projected in June, but up from the R415.8 billion that was raised in the previous fiscal year. It’s seen declining to R593.2. billion by 2023-24.
- The Treasury expects to raise a net R143 billion in domestic short-term loans in the fiscal year through March, and an average of R66.7 billion annually over the next three years.
- It intends raising R462.5 billion in domestic long-term loans this year, and an annual average of R469.9 billion over the following three years.
- Foreign loans totaling R121.8 billion are set to be raised this year, R49.4 billion in 2021-22 and R49.3 billion in the year after that.
- Gross loan debt is expected to rise to R5.54 trillion, or 92.9% of gross domestic product, in 2023-24, from R3.97 trillion, or 81.8%, this fiscal year.
- Debt-service costs are projected to increase to R353.1 billion in 2023-24, from R233 billion.
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