South Africa aims for primary balance by 2015

JOHANNESBURG – South Africa will see its budget deficit widen a touch this year to support a weak recovery, but aims to constrain expenditure and keep debt in check and over the following three years.

In its medium-term budget policy statement, the National Treasury said the deficit would be financed mainly through domestic auctions, with no plans to increase global borrowing from the US$1 billion a year for the next three announced in February.Finance Minister Pravin Gordhan said he would like to see a ‘positive primary balance’ by 2015.Growth in Africa’s largest economy has slowed, putting revenue under pressure, a scenario that will continue over the next three years.The Treasury cut its growth forecast for the next three years, seeing GDP growth rising to 4,1 per cent in 2013, compared with 4,4 it forecast in February.’Current growth rates are not fast enough to support the employment gains and poverty reduction that the country requires,’ it said in its medium-term budget policy statement.The government has previously said the economy needs to grow by an average seven per cent a year to make a meaningful dent on unemployment currently at over 25 per cent of the labour force.Gordhan plans to direct more funds towards investment and moderate spending in other categories. He is worried about the government’s wage bill, the fastest-growing component of expenditure over the past decade.’Wage settlements need to be balanced against social and economic priorities. Moderation in the growth of the wage bill will see compensation as a proportion of non-interest spending decline of the [medium term]’ the Treasury said.Gordhan said he wanted to moderate spending growth and increase revenue intake over the next three years, stabilising debt.’This means by 2014-15, we can begin to rebuild fiscal space, with a positive primary balance, or revenue broadly in line with non-interest spending,’ Gordhan said.For this financial year, the Treasury will raise its borrowing requirement to R166,6 billion this year from R157,9 billion forecast in February, to plug the budget gap.Net loan debt as a percentage of GDP is seen at 33,8 per cent in the current financial and is seen rising to 39,7 per cent by 2015. – Nampa-Reuters