South Africa’s fiscal deficit set to worsen


South Africa’s fiscal deficit is set to worsen primarily due to the country’s growth outlook, which will put additional pressure on debt levels, the National Treasury said on Monday.

This was one of the major findings by a team of experts from the International Monetary Fund (IMF), according to the Treasury.

The IMF team visited South Africa from May 27 to May 31, meeting with representatives from the government, the South African Reserve Bank (SARB), SOEs, business and academia to discuss economic developments in the country, said the Treasury.

The team found that a major risk to South Africa’s growth is the weak finances and operations of state-owned enterprises (SOEs), the Treasury said.

The team also found that South Africa’s inflation has remained at or below the midpoint of the official target range and financial stability has been maintained, according to the Treasury.

South Africa’s growth outlook is dependent on the pace of implementation of structural reforms such as strengthening governance, encouraging competition, increasing labor market flexibility and reducing the cost of doing business, the IMF said after the visit.

The IMF has lowered South Africa’s projected GDP growth rate for 2019 from 1.4 percent to 1.2 percent, putting the country among the worst performers in sub-Saharan Africa.

The Treasury said it notes the findings by the IMF as well as the key risks identified and proposed policy recommendations.

“The South African government is cognisant of these and work is underway to address them,” the Treasury said.

South Africa’s budget deficit is expected to widen to 4.5 percent of gross domestic product in the 2019/20 fiscal year from 4.2 percent in 2018/19, as economic growth remains subdued and tax revenue weak.

Meanwhile, revenue in the 2019/20 financial year will amount to 1.58 trillion rand (about 110 billion U.S. dollars), against spending of 1.83 trillion rand (about 127 billion U.S. dollars), Finance Minister Tito Mboweni said in his budget speech in Parliament earlier this year.

South Africa recorded a government debt equivalent to 55.80 percent of the country’s GDP in 2018.

The government re-emphasizes its commitment to reduce the deficit and stabilize debt as highlighted in the 2019 budget presented by Mboweni, the Treasury said.

On the revenue side, measures have been introduced to improve the capabilities of the South African Revenue Service (SARS), according to the Treasury.

A new SARS commissioner has been appointed and the SARS Large Business Center has been reestablished to make tax compliance easier, said the Treasury. Enditem

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