Budget must avoid increasing debt through spending: FCC

FILE | South African rands.

The Financial and Fiscal Commission (FCC) says South Africa must avoid increasing debt through spending that is not linked to economic growth.

Finance Minister Enoch Godongwana is set to table the National Budget on Wednesday afternoon, which is expected to be the most market-friendly budget in years.

The commission says while the low inflation environment has helped ease financial pressure, including supporting the rand and slowing interest rate increases, economic growth remains weak.

FCC Chairperson Dr Nombeko Mbava has warned that the country’s growth rate is too low to support rising public spending.

Mbava says, “This dynamic can result in entrenching a debt trap. Accordingly, the Financial and Fiscal Commission’s primary expectation and recommendation is that fiscal expenditure be aligned with actual inflation and revenue trends, alongside targeted institutional realignments to improve public sector productivity.”

INFRASTRUCTURE

Momentum Investments’ Chief Economist Sanisha Packarishimi says she will be looking to see how the promises around infrastructure, made in the State of the Nation Address (SONA), would translate in the Budget.

Packarishimi says, “I think one of the key angles that the market will be looking for is how the information from the State of the Nation Address starts to translate into actual spending on infrastructure programmes.”

She says, “We’ve heard a lot about what the aim is in order to crowd in the private sector, including the foreign market on infrastructure, but now it’s time to actually see that in the numbers and what is actually allowable in our fiscus.”