Minister Mboweni continues to tread a prudent path on fiscal strategy

Minister Mboweni continues to tread a prudent path on fiscal strategy

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JOHANNESBURG – DELIVERING the National Treasury’s R41.1 billion Budget vote yesterday Finance Minister Tito Mboweni said yesterday the Budget would be committed to the National Economic Reconstruction and Recovery Plan, including by supporting vital economic reforms, and advancing the transformation of the economy.

He said the government continued to pursue a balanced and prudent fiscal strategy in order to stabilise the public finances, saying the spending ceiling announced in February would not be adjusted upwards.

“However, we have a long and difficult road ahead. As we are all aware, the government is taking the required steps to avoid a debt spiral,” he said.

The tax revenue shortfall for 2020/21 was R175.5 billion, which was a record. “Meanwhile, debt service costs will increase to R269.7bn in the current financial year, eclipsing total spending on health-care, and consuming R1 out every R5 we raise in taxes, ” he said.

Mboweni has to walk the rocky road of fiscal prudence as South Africa sees a country review from S&P Global tonight, the only ratings agency not having a negative outlook on the country’s sovereign debt.

Moody’s this week warned again that South Africa’s low economic growth and rising debt burden could see socio-economic tension intensify and impede policy reforms, while the coronavirus pandemic’s fallout would continue to weigh on South Africa’s economic growth and fiscal balance in 2021.

Mboweni also gave a tongue lashing to non-performing and financially distressed municipalities, saying that administrative incompetence would not be tolerated by the National Treasury. He revealed that there were 163 municipalities in financial distress.

Mboweni said 40 municipalities were in a financial and service delivery crisis while other 102 municipalities had adopted budgets this year which they could not fund.

He lamented the state of many municipalities saying it had regressed.

Some municipalities were struggling to perform their basic functions, unable and sometimes unwilling to bill for services and collect revenues and some have even been bold enough to request financial assistance from national and provincial government to pay salaries.

“It is indeed lamentable that the trajectory of municipal performance is rather unimpressive,” Mboweni said. “Much of the progress made has unfortunately been eclipsed by the widespread “failure” of many municipalities. Mboweni used the Lekwa Local municipality in Mpumalanga as an example of the failure, saying the situation at the municipality was “extremely unfortunate”.

Last week, Cabinet decided to dissolve the municipal council due to a poor record of service delivery.

The government’s “intervention plan” came after Astral Food won a court case against the municipality.

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