Welcome to the Doctors' Portal
00:00 Sunday
Mediclinic News : MEDIUM-TERM BUDGET SET TO REFLECT HIGHER DEBT-TO-GDP RATIO

Title

MEDIUM-TERM BUDGET SET TO REFLECT HIGHER DEBT-TO-GDP RATIO

Date

2019-07-09

Link

https://www.businesslive.co.za/bd/national/2019-07-09-medium-term-budget-set-to-reflect-higher-debt-to-gdp-ratio/

News Description

The medium-term budget in October is likely to show a larger debt-to-GDP ratio following the steep contraction in the first quarter and low revenue collections, according to the acting head of the Treasury’s budget office, Ian Stuart. “Every budget we’ve presented in the last few years shows a higher debt to GDP. Then a few months into the year, we realise growth is not bouncing back in the way we thought it would and we have to revise that figure. That is our biggest issue,” Stuart said at the public economics winter school at the Reserve Bank on Tuesday. “We are on track for another medium-term budget policy statement that looks like this after Stats SA showed concerning growth figures in the first quarter and the dwindling tax revenue. It suggests that it will be more of the same,” he said. The economy contracted 3.2% in the first quarter of 2019 after the country experienced its worst bout of power cuts, which has seen economists and institutions alike revise down their growth forecast for the year to less than 1%. The Treasury currently expects the economy to grow 1.5%, but this is likely to be revised down in October. In May, the Reserve Bank revised down its growth forecast for 2019 to 1% from 1.3%. Meanwhile, the SA Revenue Service (Sars) collected R1.287-trillion for 2018/2019, which was R14.6bn (1.1%) short of the revised estimate of R1.302-trillion announced in the February budget. “The widening of the debt-to-GDP ratio isn’t a result of fiscal measures but it is structural in nature,” he said. He explained that there were fiscal pressures, which were likely to widen the deficit. These include Eskom’s inability to service its R420bn debt; sustained losses at state-owned entities for the foreseeable future; road accident fund liabilities, which are currently at R290bn and are continuing to grow rapidly; large accruals (unpaid bills at the provincial level that have exceeded R25bn); increasing intragovernmental debt; the deteriorating cash position of local governments; and new policy commitments that imply large additional spending, such as National Health Insurance. “The story of the last six budgets has been to both reign in spending and raise taxes. Our fiscal policy is both loose and tight at the same time, and investors are becoming increasingly wary of this position,” he said.
Created at 2019/07/15 10:59 AM by Mediclinic
Last modified at 2019/07/15 10:59 AM by Mediclinic