Budget deficit to narrow to 2.8% by 2017

© ktasimar – za.fotolia.com

The minister said despite lower than expected revenue over the past few financial years, he expected light at the end of the tunnel looking ahead.

He said this when he tabled the National Treasury Budget Vote at the National Assembly on Monday, 21 July.

"The situation is expected to improve over the period ahead, with the budget deficit projected to narrow from 4% in 2014/15 to 2.8% of GDP in 2016/17.

"If growth outcomes continue to disappoint, achieving this objective will be much more difficult.

"But government remains committed to the sustainability of the fiscus and if necessary, further measures will be taken to achieve our objectives," he said.

The minister's statement comes at the back of recent domestic pressures, including the five-month strike in the platinum mining sector, which slowed GDP at an annualised rate of 0.6% for the first quarter of 2014.

Stats SA said the slump meant that the economy was knocking on the doors of recession, as it last recorded slow growth during the 2009 recession.

Minister Nene said South Africa's budget supported the implementation of the National Development Plan (NDP), and that priority programmes that were identified in the ANC manifesto were being put into a medium-term strategic plan.

He said government would ensure that these programmes are funded.

"The changing global economic climate is providing new challenges to the fiscal outlook. When the economy was faced with a recession in 2009, prudent fiscal management in preceding years meant that we were better able to use our fiscal space to respond to the crisis," he said.

The minister said emerging economies like South Africa were, like advanced economies, entering a new environment comprising rising global interest rates, which have increased the cost of servicing debt; declining commodity prices and the depreciation of the rand that has pushed up inflation.

Minister Nene said the period ahead will not be easy.

"To ensure that the fiscus remains sustainable, the three principles that are the backbone of our fiscal stance remain in place: counter cyclicality, debt sustainability and intergenerational fairness.

"Over the next three years, government will stabilise the growth of public debt, and then begin to rebuild fiscal space.

"This will be achieved by remaining within the expenditure limits we have set in the medium term framework," he said.