The Democratic Alliance’s proposal to introduce a fiscal anchor to stabilise national debt reached a significant stage on Friday, when our notice of intention to table the Fiscal Responsibility Bill was published in the Government Gazette for public comment. The Bill will be tabled in Parliament this week.
We now call on all South Africans to submit their comments on the Bill which, if passed, will limit any of government’s ability to borrow more. This will help reduce national debt and the associated debt service costs.
The Fiscal Responsibility Bill provides for:
- a fiscal rule prescribing that, for each financial year from 2020/21 to 2023/24, net loan debt expressed as a percentage of GDP must not be more than it was the previous year.
Second, the Fiscal Responsibility Bill provides for:
- a review of the fiscal rule by the National Assembly every four years, beginning in 2023/24 by either amending, renewing or terminating the fiscal rule; and
- an annual Fiscal Responsibility Report to be tabled by the finance minister at the same time as the budget is tabled, setting out whether the fiscal rules were complied with or not, together with reasons for those outcomes, and recovery plans in the event of a failure to comply with the fiscal rule.
And, finally, because South Africa is a small open economy, vulnerable to shocks, the Fiscal Responsibility Bill provides for:
- an exemption from the fiscal rule to be granted in respect of a specific financial year, or years, by the National Assembly upon application by the finance minister, with good cause having been shown and on the recommendation of the Standing Committee on Finance.
Debt service costs is the fastest growing expenditure item on the national budget. We will already spend more than R220 billion on interest charges in 2020. If nothing is done to reverse this trend, national debt is set to increase to a staggering R4,2 trillion, or 67,5% of GDP by 2022/23.
These unsustainable debt levels are crowding out budgets for basic service delivery, a reality which became apparent in the 2020 national budget, where budget cuts were made to housing, school infrastructure, health and public transport.
The Fiscal Responsibility Bill is an opportunity for the ANC to work together with the DA to pass a Bill that will not only stabilise national finances but also create the confidence needed to assure investors that the government is committed to prudent fiscal management. We therefore call on the ANC to support the FRB.
The DA looks forward to the participation by members of the public on the processing of the Fiscal Responsibility Bill. Stakes for South Africa’s economic health have never been higher and the Bill is an opportunity to put the country on a path of sustainable economic recovery.