Malusi Gigaba is in a tight spot and his midterm budget is bound to disappoint
The finance minister has to try to keep state finances in a reasonable shape, but he is unwilling to put anybody’s nose out of joint
Finance Minister Malusi Gigaba is in a tight spot. On all metrics it is clear that the medium term budget policy statement, which he presents to Parliament next Wednesday, is going to disappoint. The large revenue shortfall is well known, running at between R35bn and R55bn in the current fiscal year. At this point in the current year, expenditure cuts are unlikely and the only way to plug this gap is by borrowing more in the market. Even looking further ahead, it is not clear that the finance minister has a plan. There is little sign that he has the stomach to significantly cut expenditure in the coming years and without meaningful fiscal consolidation, the debt-to-GDP ratio will not stabilise. He walks a tricky tightrope. On the one hand, he is trying to keep state finances in a reasonable shape but, on the other hand, he is unwilling to put anybody’s nose out of joint. Unfortunately, the fiscal deterioration has been so massive that unpopular decisions have to be made. On the curr...
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