Government will over the next three years, implement a fiscal strategy aimed at consolidating public finances and reducing risk to the country’s economy, said National Treasury.
It said the medium-term fiscal strategy had three objectives. The first was to reduce the budget deficit and stabilise debt as a percentage of gross domestic product (GDP). The second objective was to support economic growth by maintaining a prudent fiscal stance and directing resources towards infrastructure and the fight against crime and corruption.
Reducing fiscal and economic risks, including by using higher-than anticipated revenues to address contingent liabilities and develop buffers to deal with disaster risks would be the third objective.
The department said this was due to global events since February that had had a profound inflationary impact.
“Gross loan debt is now expected to stabilise at 71.4% of GDP in 2022/23. This is mainly driven by higher nominal GDP projections, resulting from higher inflation, and an improved primary balance given better-than expected revenue estimates.
“These factors outweigh the adverse impact of higher interest rates and a weaker exchange rate. Net loan debt – which is gross loan debt less cash balances – will stabilise at 69 per cent of GDP in 2024/25,” it said at the tabling of the 2022 Medium Term Budget Policy Statement (MTBPS) on Wednesday.
Over the next three years, Treasury anticipates that the consolidated budget deficit to narrow from 4.9% of GDP in 2022/23 to 3.2% of GDP in 2025/26.
“This will reduce the need to issue new debt and allow government to better manage the spike in debt redemptions, rein in debt-service costs and gradually restore growth in the baselines of key service delivery and infrastructure programmes,” it said.
It added that slower growth in debt and interest payments would encourage private investment, as high debt and interest payments raise borrowing costs, which made it difficult for businesses and households to access finance.
Source: South African Government News Agency