SA's budget deficit expected to hit R761bn by next year: Tito Mboweni
Covid-19 has hit the government hard in the pocket and will see the budget deficit projected in February exceeding 15% of GDP, for a total of R761bn by 2021.
This has been revealed by finance minister Tito Mboweni as he tabled an emergency supplementary budget in parliament, after the coronavirus outbreak forced the government to urgently change its spending plans for the year.
Mboweni also told MPs that projected tax revenue collection had dropped significantly after economic activity came to a standstill when the lockdown was introduced in March.
Mboweni said this would see projected tax collection dropping by a whopping R300bn by March 2021, which would force government to borrow more to finance its spending and policy priorities.
"Gross tax revenue collected during the first two months of 2020/21 was R142bn, compared to our initial forecast for the same period of R177.3bn.
"Put another way – we are already R35.3bn behind on our 2020/21 target. As a consequence, gross tax revenue for the 2020/21 fiscal year is revised down from R1.43-trillion to R1.12-trillion.
"That means that we expect to miss our tax target for this year by over R300bn.
"Part of this revision is because the measures announced earlier this year give taxpayers outright relief of R26bn and delays in tax collection of approximately R44bn. These proposals are contained in the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill that I table today."
The finance minister also said that the government's budget deficit would shoot up sharply from where it was projected when he tabled his budget in February. He said that, at this stage, government would have no choice but to approach international finance institutions for assistance.
"Taken together the measures and adjustments we present translate into a consolidated budget deficit of R761.7bn, or 15.7% of GDP in 2020/21.
"This is compared to the deficit of R370.5bn, or 6.8% of GDP projected in February.
"This increase is mainly due to the revised revenue projections and pay‐outs from the Unemployment Insurance Fund. The narrower measure, known as the main budget deficit, is projected to be 14.6% of GDP.
"Our early projection is that gross national debt will be close to R4-trillion, or 81.8% of GDP by the end of this fiscal year. This is compared to an estimate of R3.56-trillion or 65.6% of GDP projected in February.
"Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else.
"For this reason, we need to access new sources of funding. Government intends to borrow about US$7bn from international finance institutions to support the pandemic response.
"We must make no mistake, these are still borrowings. They are not a source of revenue. They must be paid back," he said.