February 24, 2016 / 12:10 PM / 4 years ago

South Africa expects narrower budget deficit as it cuts spending -Treasury

CAPE TOWN, Feb 24 (Reuters) - South Africa’s government expects to reduce its budget deficit to 3.2 percent of GDP in the next fiscal year from 3.9 percent in the current 2015/16 period as it tightens spending in the face of lower revenue, Finance Minister Pravin Gordhan said on Wednesday.

In a budget statement to parliament, Gordhan said Africa’s most industrialised economy faced exceptionally difficult global and domestic economic conditions over the next few years, and would have to bring down its spending ceiling by 25 billion rand ($1.6 billion) over the next three years.

“This year’s budget ... is focused on fiscal consolidation,” Gordhan said.

“We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves.”

In its budget review outlining spending plans for the next three financial years, the Treasury said the government departments’ budgets for non-essential goods and services had been cut by 5 billion rand over the medium term.

But to sustain the social wage and avoid sharp reversals in public spending, the government would adjust the tax policy to boost revenue and re-allocate nearly 32 billion rand to higher priority areas such as higher education.

From April 2016, appointments for non-critical vacant posts would be blocked on government’s payroll system, while the government would increase the general fuel levy by 30 cents a litre in the same month, to boost revenue.

“Government proposes fiscal policy adjustments to reduce the budget and stabilise debt. In line with these changes, projected deficits in each year of the forecast are lower than estimates set out in October.”

$1 = 15.3053 rand Reporting by Stella Mapenzauswa; Editing by James Macharia

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