Can Tito Mboweni sugarcoat short-term pain to gain stability, eventually?
With the country out of wiggle room to address its immediate indebtedness, Mboweni’s budget needs to pull a long-term plan out of the hat
On February 20 finance minister Tito Mboweni will present an extremely challenging budget. The discomfiting reality that SA has a serious fiscal problem. For nearly a decade since the global financial crisis, SA has followed a counter-cyclical fiscal policy, maintaining big budget deficits in the expectation that eventually, GDP, growth would recover and generate a bounty of tax receipts to fund debt repayment. However, after a decade’s worth of persistent growth disappointments, SA is now out of room to manoeuvre. Public indebtedness has more than doubled from 26% of GDP in 2008-2009 to a projected 56% of GDP currently — with further increases penciled into the National Treasury’s planning horizon. Despite big tax hikes and, to a lesser extent, some expenditure restraint over the past couple of years, SA’s budget deficits are still too wide to stabilise the debt ratio. At the time of the medium-term budget policy statement (MTBPS) in October, the National Treasury forecast a main b...
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