At face value, Finance Minister Godongwana’s MTBPS showed government finances remain under significant pressure. Revenue estimates were revised lower, and debt-to-GDP and fiscal deficit estimates were raised. Any disappointment in the market stems from the absence of bold initiatives to signal that the GNU is prepared to drive a significantly stronger trajectory for economic growth and job creation. However, there has clearly been insufficient time to embark upon major structural reforms that will encourage higher economic growth. Accordingly, the projected economic growth rate of 1.8% over the next three years, only slightly above recent forecasts, is understandable.
On the whole, the continued commitment to fiscal conservatism in the speech is welcome. Moreover, the growth projections were relatively conservative, making the overall forecasts of the budget deficit and debt levels as a percentage of GDP realistic. National Treasury will be tapping offshore markets to raise some funding, which means the local bond market is unlikely to be disrupted, and the upward adjustments to the country’s debt profile were only slight. That could easily be revised down if GDP impresses by growing a little more than anticipated. That being said, the authorities should be encouraged to continue using more conservative numbers.