SA records primary budget deficit during first quarter
Reserve Bank’s Quarterly Bulletin shows the government’s primary deficit increased as non-interest expenditure outpaced revenue
26 September 2024 - 10:31
by Denene Erasmus
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
After achieving a debt-stabilising primary budget surplus for the first time since 2008/09 in the year to end-March 2024, the government recorded a primary deficit in the April-June 2024 period.
Data in the SA Reserve Bank’s Quarterly Bulletin published on Thursday showed the government’s primary deficit increased from R1.7bn in April-June 2023 to R8.4bn in April-June 2024 as non-interest expenditure outpaced revenue.
Maintaining a primary surplus is key to government’s fiscal strategy outlined in the 2023 medium-term budget policy statement to stabilise debt and debt-service costs, with debt forecast to stabilise at 75.3% of GDP by 2025/26.
The primary deficit as a percentage of GDP was 0.5% in the first quarter of fiscal 2024/25 — higher than the 0.1% recorded in the same period of the previous fiscal year.
The Treasury has projected a primary surplus (when revenue exceeds non-interest expenditure) of R61.2bn, or 0.8% of GDP, for fiscal 2024/25.
“National government’s total revenue increased by 2.7% year on year to R418.1bn in April-June 2024 but fell short of the budgeted projection for the first quarter of fiscal 2024/25,” the Bank said.
In the year to end-March 2024, the government posted a primary surplus of R31.6bn, or 0.4% of GDP, which was in line with the Treasury’s February forecast.
The Treasury expected the primary surplus to widen to R106.5bn, or 1.3% of GDP, in 2025/26.
The Treasury said in February that increasing the primary budget surplus over the medium term, and thus narrowing the budget deficit, would also enable the government to curb the trend of rising debt-service costs that were projected to peak as a proportion of revenue at 21.3% in 2025/26 and decline after that.
According to the Treasury, high and rising government debt hampered service delivery and investment by draining ever-larger amounts of taxpayer resources for debt service. “Debt service costs now consume one of every five rands of government revenue and absorb a larger share of the budget than basic education, social protection or health,” the Treasury said in February.
According to the quarterly bulletin, domestic economic activity recovered in the second quarter of 2024 as real GDP expanded by 0.4% along with a stable electricity supply, after remaining stagnant in the first quarter.
Second-quarter growth could mainly be attributed to an increase in real gross value added by the secondary and tertiary sectors.
Output by the primary sector contracted due to decreases in both the agricultural and mining sectors.
“Agricultural activity was weighed down by the lower production of animal products and field crops, with the domestic maize crop harvest expected to be more than 20% lower than the 2023 harvest,” the Bank said.
The decrease in mining output resulted largely from the lower production of iron ore, coal and diamonds amid the domestic rail and port inefficiencies as well as subdued prices of some commodities, it said.
Total foreign direct investment in the second quarter of 2024 was down compared with the first quarter.**
SA recorded foreign direct investment inflows of R16.6bn in the second quarter of 2024, down from R24.4bn in the first quarter.
The Bank said the inflows were mostly due to non-resident parent entities increasing equity investment in domestic entities, notably a domestic company in the broadcasting sector.
Portfolio investments recorded a further outflow of R20.1bn in the second quarter after an outflow of R52bn in the preceding quarter.
The portfolio outflows reflected the disposal by non-residents of R33bn of domestic equities and the acquisition of R13bn of debt securities.
“The acquisition of domestic debt securities was partly countered by a $400m international bond redemption by a domestic bank,” the Bank said.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
SA records primary budget deficit during first quarter
Reserve Bank’s Quarterly Bulletin shows the government’s primary deficit increased as non-interest expenditure outpaced revenue
After achieving a debt-stabilising primary budget surplus for the first time since 2008/09 in the year to end-March 2024, the government recorded a primary deficit in the April-June 2024 period.
Data in the SA Reserve Bank’s Quarterly Bulletin published on Thursday showed the government’s primary deficit increased from R1.7bn in April-June 2023 to R8.4bn in April-June 2024 as non-interest expenditure outpaced revenue.
Maintaining a primary surplus is key to government’s fiscal strategy outlined in the 2023 medium-term budget policy statement to stabilise debt and debt-service costs, with debt forecast to stabilise at 75.3% of GDP by 2025/26.
The primary deficit as a percentage of GDP was 0.5% in the first quarter of fiscal 2024/25 — higher than the 0.1% recorded in the same period of the previous fiscal year.
The Treasury has projected a primary surplus (when revenue exceeds non-interest expenditure) of R61.2bn, or 0.8% of GDP, for fiscal 2024/25.
“National government’s total revenue increased by 2.7% year on year to R418.1bn in April-June 2024 but fell short of the budgeted projection for the first quarter of fiscal 2024/25,” the Bank said.
In the year to end-March 2024, the government posted a primary surplus of R31.6bn, or 0.4% of GDP, which was in line with the Treasury’s February forecast.
The Treasury expected the primary surplus to widen to R106.5bn, or 1.3% of GDP, in 2025/26.
The Treasury said in February that increasing the primary budget surplus over the medium term, and thus narrowing the budget deficit, would also enable the government to curb the trend of rising debt-service costs that were projected to peak as a proportion of revenue at 21.3% in 2025/26 and decline after that.
According to the Treasury, high and rising government debt hampered service delivery and investment by draining ever-larger amounts of taxpayer resources for debt service. “Debt service costs now consume one of every five rands of government revenue and absorb a larger share of the budget than basic education, social protection or health,” the Treasury said in February.
According to the quarterly bulletin, domestic economic activity recovered in the second quarter of 2024 as real GDP expanded by 0.4% along with a stable electricity supply, after remaining stagnant in the first quarter.
Second-quarter growth could mainly be attributed to an increase in real gross value added by the secondary and tertiary sectors.
Output by the primary sector contracted due to decreases in both the agricultural and mining sectors.
“Agricultural activity was weighed down by the lower production of animal products and field crops, with the domestic maize crop harvest expected to be more than 20% lower than the 2023 harvest,” the Bank said.
The decrease in mining output resulted largely from the lower production of iron ore, coal and diamonds amid the domestic rail and port inefficiencies as well as subdued prices of some commodities, it said.
Total foreign direct investment in the second quarter of 2024 was down compared with the first quarter.**
SA recorded foreign direct investment inflows of R16.6bn in the second quarter of 2024, down from R24.4bn in the first quarter.
The Bank said the inflows were mostly due to non-resident parent entities increasing equity investment in domestic entities, notably a domestic company in the broadcasting sector.
Portfolio investments recorded a further outflow of R20.1bn in the second quarter after an outflow of R52bn in the preceding quarter.
The portfolio outflows reflected the disposal by non-residents of R33bn of domestic equities and the acquisition of R13bn of debt securities.
“The acquisition of domestic debt securities was partly countered by a $400m international bond redemption by a domestic bank,” the Bank said.
erasmusd@businesslive.co.za
Take-home pay shows first real improvement since 2020
Reserve Bank eases into cutting cycle as inflation outlook improves
Consumer confidence recovers to five-year high
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.