MTBPS: Treasury identifies risk to the fiscus

Government remains committed to operating within the expenditure ceiling over the medium term, the MTBPS said.

In the current year, however, the recapitalisation of SAA and the South African Post Office put the ceiling at risk of a R3.9 billion breach.

In addition, there are several risks to the fiscus over the period ahead:

• The economy and revenue could underperform projections. The GDP growth outlook may be improving, but the relationship between growth and revenue collection could deteriorate further.
• Strains and imbalances within the public finances may become more pronounced. The public-sector wage bill has increasingly crowded out other spending and limited government’s ability to increase public employment.
• Debt-service costs are set to absorb a rising share of revenue.
• Several years of fiscal restraint have left funding gaps in both infrastructure and social services, reflected in the build-up of unpaid accounts and financial imbalances.
• Continued financial deterioration of major state-owned companies is a clear and substantial danger to the public finances.

Treasury states that Government will change course to mitigate the risks.

“Over the next three years, government will adhere strictly to the spending limits it has set for itself. But more is clearly required. A combination of fiscal measures and economic interventions is needed to grow the economy, address immediate challenges facing the public finances and reduce long-term risks.

“A team of Cabinet ministers reporting directly to the President has been established to develop proposals to stabilise the national debt over the medium term. These will include proposals to narrow the deficit, stimulate economic growth and build investor confidence. The team will work to ensure that the spending ceiling remains intact in the current year.”

According to the MTBPS, a broader set of asset disposals is also under consideration, along with a restructuring of the portfolio of public assets to reduce risks posed by contingent liabilities. A new framework for the management of guarantees is being developed.

“Additional measures to reduce expenditure, raise revenue and improve the impact of public resources on economic growth will be announced in the 2018 Budget.”