Thursday, 11 November 2021
Cape Town: The National Treasury says it will use the higher-than-expected revenue collection to reduce the budget deficit.
“During 2021, the economy has recovered more quickly than expected. Tax revenue is higher than projected in the 2021 Budget on the strength of the global commodity price surge, but these gains are temporary. The revenue outlook remains well below pre-pandemic estimates.”
The National Treasury said gross tax revenues are expected to exceed the estimates presented at the time of the 2021 Budget by R120.3 billion in 2021/22.
In February, Treasury estimated the in-year revenue shortfall at R213.2 billion.
“Government will use the higher-than-expected tax revenue to reduce the deficit and provide additional short-term support for health, social protection, job creation, and peace and security.
“This fiscal course will be maintained over the MTEF period, resulting in a primary budget surplus – where revenue is higher than non-interest spending – by 2024/25, bringing the period of fiscal consolidation to an end.”
National Treasury said there is profound uncertainty about the durability of the economic recovery, mainly due to renewed volatility in global conditions and the risk of renewed Eskom power cuts.
“In addition, certain domestic risks identified in the 2021 Budget have begun to materialise. These include the recent public service wage agreement, which breached the budget ceiling for compensation of employees by R20.5 billion, and continued deterioration in the financial position of several major state-owned companies.
“Accordingly, the 2021 MTBPS charts a course to ensure sound public finances and long-term economic growth by narrowing the budget deficit and stabilising debt.
“Gross debt is expected to peak at 78.1% of GDP in 2025/26 and decline thereafter. Debt-service costs will fall below 22% of main budget revenue by 2026/27. This consolidation will be supported by structural reforms that unlock private-sector investment and job creation.”