PRIVATE MEMBER’S BILL
DA proposes statutory fiscal rules to curb rocketing state debt and guarantees
A law on fiscal rules will give Parliament authority over this critical aspect of the budget
The promulgation of statutory fiscal rules — the first in SA — has been proposed by the DA to put a brake on rocketing government debt and guarantees.
Having fiscal rules as a statute would give Parliament authority over the critical aspect of the budget, which is normally just rubber-stamped by the legislature.
Fiscal rules are used in about 89 countries including the UK. The Treasury uses an expenditure ceiling to curb spending, but this is only a self-imposed rule.
The proposal is to cap the growth of net loan debt as a percentage of GDP. This percentage has soared from 21.8% in 2008-09 to 50.3% in 2018-19, with net loan debt rising from R526bn to R2.5-trillion over this period.
Debt service costs, which will be R180bn in the current year, are expected by the Treasury to rise to R277bn in 2023-24, which is R30bn more than will be spent on basic education in the current financial year.
DA finance spokesman David Maynier has proposed a draft private member’s bill, the Fiscal Responsibility Bill, which stipulates that for each financial year from 2019-20 to 2022-23 consolidated government net loan debt expressed as a percentage of GDP must not be more than it was in the previous financial year. This would mean that the gross amount of debt could increase if GDP rose.
The bill would also require that the finance minister ensures that aggregated government guarantees must not be more in each of the financial years from 2019-20 to 2022-23 than they were for the financial year 2018-19, when they stood at R432bn.
The proposed bill makes provision for a review of the fiscal rules every four years beginning in 2023-24, as well as for exemptions from the rules to deal, for example, with exogenous shocks to the economy.
BNP Paribas economist Jeffrey Shultz said that from a fiscal sustainability point of view the proposal made some sense because a cap on debt to GDP levels would promote efficiency in government spending and would restrain rising debt service costs.