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Finance Minister Tito Mboweni has warned that public finances must be rehabilitated as efforts are made to help the economy recover from the pandemic and the COVID-19 shutdown.
Finance Minister Tito Mboweni delivers his speech on medium-term budget policy in Parliament on October 28, 2020 in Cape Town. Image: GCIS
CAPE TOWN – Finance Minister Tito Mboweni hopes to reduce the public sector wage bill to help reduce the budget deficit and stabilize debt over the next five years in order to return public finances to a sustainable position.
At the same time, he announced that the bankrupt national airline South African Airways (SAA) will receive a ransom of R10.5 billion, in addition to the more than R16 billion it received in the February budget.
Mboweni delivered the long-awaited Medium-Term Budget Policy Statement in Parliament on Wednesday, warning that public finances must be rehabilitated as efforts are made to help the economy recover from the pandemic and the COVID-19 shutdown.
• READ: Tito Mboweni Medium Term Budget Policy Statement
Mboweni said the economy was expected to contract by nearly eight percent (7.8%) this year, but could rebound to 3.3% of GDP next year and then to an average of 2.1% over the course of the year. the three-year forecast period.
The Treasury expects economic output to return to pre-pandemic levels in 2024 alone.
“Now we must support rehabilitation and fiscal growth. Right now, the government is borrowing at a rate of R2.1 billion a day. This cannot continue.”
A warning from Finance Minister Tito Mboweni that debt levels are unsustainable and without curbing it and reducing the budget deficit, South Africa will face a sovereign debt crisis.
He has put in place a series of measures aimed at getting the country’s finances back on track, but there will be pain involved.
The tax revenue shortfall for this year is more than R312bn. Government debt is already eating up 21 cents of every rand, taking money away for other programs.
Gross national debt is expected to reach 95.3% of GDP in five years.
Mboweni said a new consensus must be forged on public servants’ salaries.
“We need a strategic conversation that takes into account the needs of the country as a whole. Our compatriots in the private sector have already made sacrifices and even negotiated salary cuts to keep their businesses afloat.
“Over the last five years, compensation for public sector employees grew 7.2% a year on average, well above inflation. Over the next five years, it will have to grow much, much lower.”
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