The Minister of Finance, Tito Mboweni’s, “maiden” medium-term budget policy statement reveals a full-scale budget blowout, which is clear evidence that the “new path” of economic growth, employment and transformation has failed in South Africa.
The medium-term budget policy statement reveals a full-scale budget blowout, with stagnant economic growth (2%), lower-than-expected revenue (R85 billion), higher-than-expected expenditure (R12 billion) and “bail-outs” of state-owned enterprises (R9 billion), including a R5 billion “bailout” of zombie state-owned airline, South African Airways.
The fact is that, compared to Main Budget 2018, there will be significant “fiscal slippage”, with:
- the fiscal deficit increasing by R22 billion in 2018/19, R33 billion in 2019/20 and R41 billion in 2020/21;
- national debt increasing by R19 billion in 2018/19, R55 billion in 2019/210 and R103 billion in 2020/21; and
- the national debt will now only stabilise two years later at 56.5% of GDP in 2025/26.
What this means is that debt service costs will skyrocket to a staggering R247 billion in 2021/22, which is R148 billion more than we will spend on police, R55 billion more than we will spend on social grants, and is equal to what we will spend on basic education this year, 2018/19, in South Africa.
Which is why ordinary people, who are battling to make ends meet, and who are battling to put bread on the table, are likely to be hit by further tax increases over the medium-term, to effectively “bail-out” the governing party, who have mismanaged the economy for more than a decade in South Africa.
We have an expenditure problem and must now implement a Comprehensive Spending Review aimed at reducing national debt and debt service costs, over the medium term between 2019/20 and 2021/22.