Government not swimming in cash, warns Tito Mboweni in Budget 2021 Speech
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Johannesburg – Finance Minister Tito Mboweni has stuck to fiscal consolidation and reined in expenditure by proposing a wage bill cut of R300 billion in the next three years, that will reduce debt in the next five years and allocate billions for the vaccines.
He said, after the economy opened up, they expected it will grow by 3.3% this year after a slump of 7.2%. The budget deficit will decrease from 14% to 6.3% and this will boost the economic recovery.
As had been expected, tax revenue increased by R100bn. This was higher than projected in the Medium Term Budget Policy Statement in October.
The government also extended the Covid-19 special relief grant of R350 to the unemployed until April. This will be an additional R2bn from the Department of Social Development.
“Regular social assistance grants are adjusted as follows: A R30 increase for the old age, disability and care dependency grants to R1 890. A R30 increase in the war veterans grant to R1 910. A R10 increase in the child support grant to R460. A R10 increase for the foster care grant to R1 050,” said Mboweni.
Mboweni said the contingency reserves had been increased from R5 billion to R12bn to accommodate the Covid-19 situation, due to the uncertainty about the pandemic.
This follows the allocation of R10bn to procure vaccines in the next two years.
This comes as Health Minister Zweli Mkhize said another batch of 80 000 doses from Johnson & Johnson would arrive this weekend.
“Government’s immediate priority is to support a rapid return to economic growth in the wake of the Covid-19 lockdown. A mass vaccination programme, provided free of charge, will support a reopening of the economy and GDP growth of 3.3% this year,” stated the review.
The budget review revealed that Eskom, SAA and the Land Bank received more bailouts.
This is despite Mboweni not mentioning this in his speech.
The budget review showed Eskom will get R31.7bn, SAA will receive a bailout of R4.3bn and the Land Bank will be given R7bn.
“In the budget review, R16.4bn was set aside for SAA over the Medium Term Expenditure Framework period to settle legacy state-guaranteed debt and associated costs. Of this amount, R10.3bn was allocated in 2020/21, with R4.3bn and R1.8bn to be allocated in 2021/22 and 2022/23 respectively,” stated the review.
Mboweni also denied this was an austerity budget.
He also dismissed claims the government was swimming in cash. This follows reports government gained R100bn in tax revenue than projected.
“An incorrect notion has taken hold that the government is ‘swimming in cash’. Certainly, compared to last October, we are in a better place. But our assessment from the Supplementary Budget in June last year still stands: our public finances are dangerously overstretched. Our borrowing requirement will remain well above R500 billion in each year of the medium term, despite the modest improvements in our fiscal position. Consequently, gross loan debt will increase from R3.95 trillion in the current fiscal year to R5.2 trillion in 2023/24,” said Mboweni.
Mboweni also announced an increase in sin taxes.
He said this would boost coffers of the government and they wanted to cut down on the public sector wage bill by R303bn in the next three years.
However, the government was in talks with the unions on the new wage talks this year.