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Kay Walsh of Deloitte discusses the South African budget and debt sustainability


The South African budget and debt sustainability

For a more detailed discussion around the SA budget and debt sustainability, contact Kay Walsh (Executive Lead at the Deloitte Economics Advisory Unit) at kaywalsh@deloitte.co.za or Peter Searle (Analyst at the Deloitte Economics Advisory Unit) at pesearle@deloitte.co.za

Presenting the Medium Term Budget Policy Statement (MTBPS) in October 2012, Finance Minister Pravin Gordhan noted that fiscal policy guidelines in South Africa continue to promote counter-cyclicality, sustainability and intergenerational equity.

While counter-cyclical fiscal policy has been practiced in significant measure since the onset of the 2009 recession – government has run large budget deficits in a bid to bolster South Africa’s tentative economic recovery – debt sustainability and intergenerational equity have had to take a backseat.

The 2013 Budget, however, should see National Treasury putting an increased focus on stabilising public debt, reigning in the deficit and shifting the expenditure composition within the budget. With the arrival of the 2009 recession, government adopted a counter-cyclical fiscal stance to shield the economy from the sharp slowdown in global demand.

This saw the budget balance swing from a surplus of 1.7% of GDP in 2007/08 to deficits in excess of 4% of GDP between 2009/10 and 2011/12. While this strong fiscal response assisted in supporting the economy, it resulted in the rapid accumulation of government debt over a relatively short period of time.

CLICK HERE to download the full report . . . . The South African budget and debt sustainability

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David Graham

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