With South Africa’s public finances in a precarious state, the National Treasury’s decision to ask all national departments to slash their budgets for the next three years has not come as a surprise, said an expert.
The National Treasury has suggested all national departments cut their budgets by 5 percent in 2020, 6 percent in 2021 and 7 percent in 2022 in the medium-term expenditure framework guidelines.
The guidelines come at a time when the country’s economy growth is stagnant, joblessness on the rise and rating agencies have expressed concerns about billions of rands that have been given to indebted state-owned entities.
The expert believed that while there was a need for budget cuts at national level, this should also be extended to provincial departments.
“It wouldn’t be sufficient at national level only, provincial departments must also deal with their expenditures. Treasury has realized that the medium-term budget framework previously announced can no longer materialize because of the poor growth and declining revenue collection,” Professor Jannie Rossouw, Head of School of Economic and Business Sciences at the University of the Witwatersrand, told Xinhua on Thursday.
Rossouw suggested that the Treasury continue looking for ways to rein on expenditure and trim the wage bill.
“If government spends without growth and tax, it means government’s debt will increase. The major expenditure is the wage bill and not give huge wage increases would assist in reducing expenditure,” he said.
He also said that government could place a moratorium on new appointments.
Finance Minister Tito Mboweni would be under immense pressure when he delivers the medium-term budget speech in October as revenue collection is set to decline.
Some have warned the government to cut its expenditure in an effort to avoid approaching financial institutions such as the International Monetary Fund for funds.
The South African government’s debt is now above 60 percent of the GDP. Enditem