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Govt expenditure increases drastically

The Minister of Finance Thabo Sophonea

Feb. 19, 2021 2 min read

2 min read

GOVERNMENT expenditure is projected to increase drastically to 60.3 percent of GDP against slower revenues while the fiscal position will also remain weak through the medium term.

For the past financial year, a projected outturn in total expenditure is estimated at 57.7 percent of GDP comprising of 44.1 percent and 13.6 percent of GDP in recurrent and capital spending respectively.

This demonstrate another slight decline from 2019/20 total expenditures in nominal terms.

The Minister of Finance Thabo Sophonea made these remarks on Wednesday when presenting the 2021/22delivering his budget speech on Wednesday for the 2021/22 fiscal year at the National Assembly.

He said while most components of recurrent spending are expected to maintain the upward trajectory, operating costs are expected to decline consequent to the government policy of rationing expenditure through the release of monthly warrants.

A drastic cut in international travel is also attributed to the expected decline in this category. A policy is hailed as crucial in ensuring efficiency in public finance management.

On the other hand, caution must be exercised not to curtail operating costs that are required for service delivery, the focus must be on unproductive consumption.

For 2021/22 fiscal year, capital budget will rebound to 15.7 percent of GDP as the government remains committed to alleviate the development gap and promote growth and job creation.

“Government is faced with a need for a tight fiscal consolidation effort to counter the effects of the pandemic and lingering fiscal imbalances while at the same time advancing productive capacity,” Mr Sophonea said.

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He added that the ensuing developments in revenue and expenditure will result in overall fiscal deficit of 3.0 percent of GDP in 2020/21 financial year before ballooning to 13.1 percent in 2021/22 while averaging 10.2 percent in the outer years.

“These fiscal imbalances are unsustainable and exert a considerable pressure on our international reserves which need to be maintained at an adequate level to preserve the peg.

“They further impose downside risks to the country’s debt which is currently moderate and may result in distasteful debt distress. The urgency of fiscal consolidation and implementation of the economic reforms cannot therefore be overemphasised,” he added.




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