The Treasury expects a budget deficit — which is shortfall between revenue and expenditure — of more than 14%, it has said in a presentation to social partners ahead of Wednesday’s supplementary budget.
The -14% is higher than most previous estimates by multilateral organisations and private economists. Most private economists’ forecasts have not breached -10% for 2020-21.
On Facebook early on Saturday, finance minister Tito Mboweni likened the yawning deficit to a hippopotamus mouth, saying that “the Herculean task is how to close the mouth of the hippopotamus”.
The presentation was delivered by the treasury at a Nedlac meeting on Friday. Usually, the Nedlac social partners are briefed on the budget and the adjustment budget after it has been presented on Friday.
Prior to the Covid-19 crisis, which has sent 90% of countries into deep recession, treasury had anticipated a budget deficit for this fiscal year of -6.8%. But additional spending measures to combat the health and welfare crisis and a steep drop in revenue due to the sudden stop of most economic activity have caused this to more than double.
The presentation also shows a dramatic increase in government debt. In February, the budget showed that the debt to GDP ratio 71.6% by 2022/2023. Debt is now expected to reach 90.9% of GDP by 2022/2023. The ratio shows no indication of consolidation and, if not additional revenue or spending measures are taken will reach 113.8% by 2028/2029.
The supplementary budget on Wednesday is not expected to introduce additional revenue measures as this can only be done at the main budget in February. It will, however, seek to reprioritise R130bn of spending towards health and welfare responses.
Correction June 20 2020
The article has been corrected to remove a reference to the World Bank's deficit estimate.
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