South Africa’s 14-year streak of losses continues

John Johnson
John Johnson

Global Courant 2023-05-08 18:18:05

South Africa is likely to fall short of its fiscal 2023 primary budget surplus target of R8.2 billion after revenue collections fell just short of estimates due to higher-than-expected value-added tax returns.

Africa’s most industrialized economy recorded a primary budget deficit of R1.5 billion, in the fiscal year through March 2023, the National Treasury said in an emailed response to questions, citing preliminary data.

That compares to a forecast for a surplus of R6.7 billion, which would have been the country’s first positive primary budget balance – where revenue exceeds non-interest-bearing expenditure – since the global financial crisis.

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The minor miss shows that the Treasury still faces challenges in bringing revenues back in line with spending, years after South Africa’s public finances were weakened by an era of public money and after the coronavirus pandemic drove tax revenues up. ties and led to an increase in benefits.

The rand retracted some of its gains and was trading 0.3% stronger at 18.3590 per dollar at 1:56 pm in Johannesburg. Yields on 2035 South African benchmark debt rose eight basis points to 11.5%, the most behind Turkish bonds of the 26 emerging markets Bloomberg tracks.

The Treasury made the primary budget balance the country’s most critical fiscal anchor in 2021, rather than a spending cap. Earlier it said achieving a primary surplus will bring multi-year fiscal consolidation efforts to an end and allow the government to “rethink funding South Africa’s priorities” in a more stable environment.

Finance Minister Enoch Godongwana’s February budget showed that the Treasury had already fulfilled that commitment by proposing no spending cuts for the next three years.

Preliminary data also show that a large budget deficit of R310 billion, or 4.7% of GDP, was recorded for the fiscal year, the Treasury said. The main budget deficit worsened from the government’s February forecast of 4.5% of GDP, after revenues fell short of estimates and expenditures rose more than expected.

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“The results are less positive than expected, but still reflect significant improvements in the government’s fiscal position compared to recent years,” Edgar Sishi, the head of the budget bureau, said in an email.

“We believe the results reflect a combination of stronger-than-expected efficiency in processing VAT refund requests to eligible taxpayers, and the persistence of a challenging financial environment, with debt service remaining a key focus for taxpayers. policy.”

Key budget revenues were R6.1 billion less than expected after value-added tax refunds rose 21.6% from a year earlier, driving total collections down, the Treasury said. Major budget expenditures beat estimates due to higher-than-expected non-interest expenses of R2.2 billion and debt servicing costs of R1.3 billion.

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The worse-than-expected outcome means the consolidated budget deficit, which includes total expenditures by counties, Social Security funds and select public entities, could be larger than the Treasury’s forecast of 4.2% of GDP.

The final results for the main measures will be published in the medium-term budgetary policy statement due in October. First-quarter GDP data, to be released by the statistics agency on June 6, will affect results.

Economists in a Bloomberg survey predict that the economy grew by 0.1% quarter-on-quarter in the three months to March. The Treasury declined to share its GDP forecast for the first quarter. February’s forecast of 0.9% growth for the current calendar year is more than three times higher than the latest estimates from the International Monetary Fund and the South African Reserve Bank.

Read: It’s going to be exciting for South Africa

South Africa’s 14-year streak of losses continues

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