Slower growth and more debt

The debt outlook will make it necessary for the government to have an “honest” conversation with ratings agencies‚ Mboweni said in a media briefing before his address to parliament. The “sweet spot” that the country should be aiming for is a ratio below 50%. The MTBPS was “being issued at a time of very low economic growth‚ so by definition that leads to lower revenue outcomes” and the treasury was “trying to do our best out of a very difficult situation”‚ he said.

Even the good news came with a health warning. An 11% increase in tax revenue collection in the first six months of the year was achieved on the back of a backlog in VAT refunds‚ creating “an overly optimistic view of revenue growth”.

Efforts to clear the backlog‚ together with the impact of the recession‚ will result in a R27bn revenue shortfall‚ relative to what was estimated in Gigaba’s budget. Increased VAT refunds will account for R20bn of the shortfall‚ with the rest due to lower tax receipts. The situation will improve only marginally to R24.7bn in 2019/20.

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