Fiscal stability is the target

The government's policy of fiscal stability remains in place, according to Finance Minister Pravin Gordhan.

This was in spite of the fact that the government would post larger budget deficits over the next three years than earlier thought.

"South Africa is moving toward fiscal consolidation," Gordhan said when he took part in a panel discussion in Johannesburg hosted by BusinessLIVE yesterday.

"We are saying we are going to take a slightly slower approach to consolidation than we thought before - that is because revenue hasn't performed."

Gordhan said the government would aim for "counter-cyclicality" in the budget, but this did not mean there would be no "minor fluctuations".

The minister said in last month's Budget speech that the projected budget deficit for the government for the 2011-12 fiscal year had increased to 5.3% of GDP from the 4.6% expected previously, while the 2012-13 and 2013-14 deficits had also been revised upward to 4.8% and 3.8% respectively (3.9% and 3.2% previously).

However, the three-year projections still indicated there would be a decline in the deficit and, compared with other countries, the deficits and current levels of government debt were still relatively small.

Gordhan emphasised that the government did not wish to trim its budget to the extent that austerity prevailed.

"We must also declare our philosophical point of view so the South African public can decide."

The finance minister stressed that the government had to make a choice about how to respond to the global financial and economic crisis that began in 2008.

"Many developed countries have shown far more ineptitude in the running of their economies," he said.

The government had allowed the deficit to grow to protect South Africans against austerity measures being put in place in other countries, the minister noted.

Gordhan said that globally, concern was growing about food price inflation and the rise in oil prices.

Crude oil has surged 23% since the beginning of January, reaching $117.40 a barrel yesterday.

South Africa's energy department increased the petrol price by almost 5% last week after a 3% increase in February.

Gordhan stressed that the central bank would maintain its independence.

"We are moving into an era where inflation pressures should be taken into account," he said.

However, he noted that all players needed to take a medium-term view. - BusinessLive