Mini budget highlights – the MTBPS in a box

26 Oct 2022

Here are some of the highlights of the 2022 Medium-Term Budget Policy Statement presented on Wednesday by Finance Minister Enoch Godongwana.

Strategy/goals: The 2022 MTBPS aims to reduce fiscal risks in the short term, narrow the budget deficit and stabilise debt. It also proposes measures to enhance economic growth and restore funding for infrastructure and service delivery programmes.

Debt: Gross loan debt is seen stabilising at 71.4% of GDP in 2022/23 – two years earlier and at a lower level than projected in the 2022 Budget Review. Net loan debt – which is gross loan debt less cash balances – is forecast to stabilise at 69% of GDP in 2024/25. Gross loan debt is expected to increase from R4.75-trillion in 2022/23 to R5.61-trillion in 2025/26.

Budget deficits/surplus: The consolidated budget deficit is seen narrowing from 4.9% of GDP in 2022/23 to 3.2% of GDP in 2025/26. Along the way, in 2023/24, a primary budget surplus of 0.7% of GDP is expected, which would be the first such surplus in 15 years. There will still be a budget deficit, but revenue in this scenario would exceed non-interest spending, an accounting sleight of hand.

Borrowing: Long-term borrowing in the domestic bond market will decline from R330.4-billion estimated in the 2022 Budget to R299.4-billion in 2022/23, averaging R312.4-billion over the medium term.

Revenue collection: The MTBPS says revenue collection has exceeded projections across most major tax categories. In the current year, the government will use 65% of this projected additional revenue to improve its primary balance, followed by 45% in 2023/24 and 37% in 2024/25. Tax revenues are expected to increase to R2.04-trillion, or 25.4% of GDP, by 2025/26, from R1.86-trillion in the current 2022/23 financial year.

Mtbps 2022 Speech by janet on Scribd

Domestic economic growth projections: Economic growth in 2022 has been revised down to 1.9% from 2.1% previously. GDP growth is expected to average 1.6% over the medium term.

Spending: Over the medium term, 59.2% of consolidated non-interest spending goes to the “social wage” – combined public spending on health, education, housing, social protection, transport, employment and local amenities. Medium-term spending increases are targeted to increase the number of teachers and police, retain health workers, and improve critical water, road and rail infrastructure.

Consolidated government spending is expected to increase from R2.21-trillion in 2022/23 to R2.48-trillion in 2025/26, growing by an annual average rate of 4%. The government also plans to increase infrastructure budgets. Spending on building and other fixed structures is projected to increase from R66.7-billion in 2022/23 to R112.5-billion by 2025/26, at an annual average of 19% over the medium term.

Public entities plan to invest R145.8-billion in infrastructure over the medium-term expenditure framework period, including R85.3-billion in the transport sector and R33.3-billion in the water sector. The South African National Roads Agency Limited (Sanral) will spend R61.8-billion to build new road infrastructure and rehabilitate key transport routes serving the economy, mainly on the non-toll network, where more than 85% of roads are beyond their design life. The Passenger Rail Agency of South Africa plans to spend R23.6-billion to rehabilitate vandalised and stolen rail infrastructure and to continue the modernisation programme, which includes renewing the fleet of rolling stock.

SOEs: The government is allocating R30-billion to Denel, Sanral and Transnet in the current year.

The statement notes that the Land Bank remains “in financial distress” and R5-billion remains in the contingency reserve in 2022/23 as part of the funding provided for it in the previous budget.

There are plans to provide debt relief to Eskom to address the utility’s liquidity challenges. This includes taking over a portion of its close-to R400-billion debt. Further details on this front will be provided in the 2023 budget in February. DM/BM

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