Budget deficit projected to widen to 14.6% - Masondo

Deputy Finance Minister David Masondo estimates that the budget deficit will widen to 14.6% of gross domestic product (GDP) in the current financial year. 

This is a sharp contrast to the projection of 6.8% in February and 6.3% last year. 

Masondo fielded questions in the National Assembly on Wednesday where he shared Treasury’s plans with MPs to turn the country’s fortunes around.  

“The short term fiscal measures adopted are meant to provide support to the economy by maintaining the spending envelope in the context of falling revenue, redirect funds towards the response to Covid-19 interventions and to provide support to business by raising the contingent liabilities of the state. 

“In this regard government has undertaken a counter-cyclical approach in response to the Covid-19 pandemic in 2021 in which the main budget deficit is projected to widen to 14.6% of the GDP and the debt to reach 81.8% of the GDP.”

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Masondo said Treasury would have to tighten its belt to meet targets. 

“This will require spending reductions and revenue adjustments amounting to approximately R250 billion over the next two years, beginning in 2021/22.

“Work is under way to ensure that fiscal consolidation and debt stabilization is achieved.”

Earlier this year, the International Monetary Fund (IMF) approved the R70 billion loan to help South Africa fight the coronavirus pandemic. 

Masondo said the funds were being directed where needed. 

“This money has gone to the national revenue fund and it’s directed towards different expenditure items within Covd-19 because when that money comes, it’s very difficult to separate it.  

“We are on a regular basis ready to come and report on how we are spending that money, including being honest to indicate where the wastage is, where corruption is and have consequence management in areas where money is not spent in line with what South Africans expect.”