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The biggest risk to overall financial health is not containing the rising public sector wage bill. The government is fighting in court with public sector unions over their refusal to implement the final leg of a costly wage deal signed in 2018.
The government has proposed moderate wage increases for the remainder of the wage deal and a three-year freeze on public sector wages thereafter.
“Reducing the deficit and improving the composition of spending requires reductions in the growth of the wage bill, which represents around a third of the consolidated budget. The salaries of public officials have grown by around 40% in real terms during the last decade, ”said the Treasury.
High debt service costs also remain a threat to growth and the fastest growing line of state spending, which consumes 21 cents of every rand the government spends. If the fiscal situation does not improve, South Africa could default on its debt.
“Failure to address the deterioration in the fiscal position could lead to a sovereign debt default, which would lead to a reversal of many achievements of the democratic era.”
In June’s special tightening budget, Mboweni warned that SA was at risk of a fiscal and sovereign debt crisis similar to those faced by Zimbabwe, Argentina and Greece, if things stayed the same.
Economic growth will contract by 7.8% in 2020, but will rebound with GDP growth of 3.3% in 2021/22, the Treasury forecast. The economy will continue to grow at an average of 2.1% for the next three years.
The government is pinning its hopes on a speedy implementation of the economic recovery plan whose main focus is expanding electricity generation, building infrastructure, allocating high-demand spectrum, supporting industrial growth and local manufacturing, and increasing employment.
TimesLIVE
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