The revised budget 2025 this week comes with considerable uncertainty, and controversy, about the likely adjustments to be made to compensate for the politically unpalatable two percentage point VAT hike proposed originally. However, the following critical tenets should remain intact:
Fiscal consolidation: The initial budget preserved government’s commitment to stem the mounting fiscal debt-GDP ratio in the coming fiscal year (FY25/26). The objections to the budget, from GNU partners in particular, weren’t against debt stabilisation but rather against its likely mechanisms (a two percentage point VAT hike in particular). We expect this commitment to remain unwavering in the final budget, with policymakers clearly cognisant of the onerous debt repayment costs (which exceed the cost of all social grants by R171bn per year) as a result of the surge in government’s debt burden (with the debt-GDP ratio rising nearly 30 percentage points over the past decade). This will be the singl...
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