Transcript War on Terror & The Investment Implications

MTBPS Hearings 2002
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Fiscal Health
• R8.1bn revenue overrun
– Notwithstanding SARS’ improvements, this was
largely due to inflation
• 1.6% budget deficit
• 41.4% estimated debt to GDP
– Continued steady decline
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Meeting of Expenditure Objectives
•
1/2
Stated objectives
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–
•
real growth in expenditure on public services with
particular emphasis on social services and
enhancing municipal infrastructure and services
Efforts to achieve objectives
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–
–
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Increased infrastructure spending, welfare spending, safety
Increases in infrastructure grants and spending at national,
local and provincial government.
Increased share of capital vs. current expenditure
Increased capacity building and restructuring grant to
improve delivery capacity
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Meeting of Expenditure Objectives 2/2
• Room for improvement?
– Nominal expenditure growth +8.7% from + 13.7%
– Real (non-interest) expenditure +4.7% from +6.7%
– Increasing deficit from 1.6% of GDP could support
more aggressive spending
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Balancing Growth and Inflation
• 2002 and 2003 inflation forecasts raised
– from 6.9% and 5.8% to 9.2% and 7.2%
• R3.4bn extra to compensate for inflation
• Tax relief sensitive to inflation
– Less aggressive personal tax cuts in 2003/04
– Surplus being diverted to loss on NOFP instead of
spending
– Fuel levy rise to be less than inflation
• Marginal shift in bias towards growth away
from inflation
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Omissions
• Privatisation
– No mention was made of Telkom’s IPO
• Arms Deal
• Inflation Targeting Escape Clause
– The shifting out of the 2004 inflation target is
consistant with the escape clause,
– but there remains uncertainty as to the mechanics of
absorbing future shocks
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