Pressure mounts ahead of Gordhan's mid-term budget speech

Pressure mounts ahead of Gordhan's mid-term budget speech

Amid a court battle and widespread student protests for free higher education, Finance Minister Pravin Gordhan is finalising a challenging Medium Term Budget Policy Statement (MTBPS).

Pravin Gordhan Flickr

There are mixed views on whether Gordhan will announce a tax increase this Wednesday when he delivers his MTBPS in parliament.


Econometrix chief economist, Dr Azaar Jarmine, doubts that the minister will. 


He says the weak economic growth and tax shortages will play a role.


"Unless government cuts back on its expenditure or increases taxes, which it is unlikely to do outside the main February budget, it is quite possible that the budget deficit this coming year will be in excess of what it bargained for in February," says Jarmine.


Jarmine says this year's MTBPS is a critical one, given the possibility that credit rating agencies are about to downgrade South Africa's credit rating.


"One of the things they are looking at is evidence of fiscal consolidation, in other words the ability of a government to stick to its budget targets. The problem is that economic growth has turned out to be a lot weaker than was envisaged when government drew up its budget originally and with weaker economic growth, tax revenue growth has also slowed," says Jarmine.


Jarmine used the FeesMustFall movement as an example of the accounting challenges Gordhan faces.


"If government is now to forego fee increases from universities…that will cost it. It will have to find the money elsewhere and the most obvious source will be to divert some of that contingency reserves - R5 billion of which are vetted towards such goals," says Jarmine.

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