The Minister of Finance, Malusi Gigaba’s, “maiden” medium-term budget policy statement exposes the full horror of President Jacob Zuma’s catastrophic management of the economy in South Africa.
The Rand immediately plummeted to R 14.10 to the dollar, its lowest level this year.
Economic growth has slowed and the February projection of 1.3 % has been lowered to 0.7 %, still higher than the 0.5 % recently projected by the International Monetary Fund. Economic growth is expected to recover slowly, reaching 1.9 % in 2020.
The minister’s medium-term budget policy statement reveals a full-scale budget “blow out” with:
- a massive revenue shortfall of R 50. 8 billion, which is the largest revenue shortfall since the global financial crisis;
- a breach of the expenditure ceiling by R 3.9 billion, which was in part caused by the R 10 billion bailout of South African Airways, and which had to be offset mainly by using the contingency reserve (R 6 billion), projected underspending (R 3 billion), and selling the family silver, in the form of shares in Telkom shares (R 3.9 billion); and
- an increase in the budget deficit by R 54 billion to R 203 billion, or 4.3% of GDP in 2017/18.
- The budget results in an increase in national debt of R 67.9 billion to R 2.3 trillion, or 54.2% of GDP and an increase in debt service costs of R 900 million to R 163.3 billion, in 2017/18.
The budget “blow out” ricochet’s through the medium term pushing national debt to R 3.4 trillion, or 59.7% of GDP, in 2020/21.
Gigaba’s maiden Medium-term Budget Policy Statement was delayed when the EFF disrupted proceedings. Gigaba started his speech after the opposition party left the house.
The rand was trading at R 13.74 against the greenback just before the proceeding in Parliament started.