Download Consolidated fiscal framework, 2010/11 – 2016/17

Outline
 Purpose
 Economic performance
 Impact of slower growth
 Consolidated fiscal framework
 Non-interest expenditure
 Interest expenditure
 SA’s credit rating
 Priority programmes
 Priority spending sectors
 Implications
Purpose
To provide members:
 with an assessment of the current economic situation
underlying the fiscal framework
 the impact on the estimated growth in revenue,
expenditure, the budget deficit and government
borrowing
 with a review on outcomes of expenditure to consider
for possible reprioritisation, strengthening or efficiency
gains within sectors
 To assist members with making recommendations for
possible adjustments to the current appropriations.
Economic Performance
 GDP growth in 2013: 1.8 per cent
 GDP estimated growth for 2014: 2.7 per cent
 1st quarter of 2014: contraction of 0.61 per cent since
the 3.8 per cent growth in the last quarter of 2013
 Revised estimates from different institutions for 2014:
between 1.9 and 2.3 per cent
 There is therefore a possibility that government
would also revise the growth forecast over the
next medium term.
Impact of slower growth
Revenue estimates
performance:
are
based
on
economic
 Slower growth will translate into lower revenue
collection rates.
 If expenditure levels remain the same, the
budget deficit will increase.
 Higher deficit translates to higher borrowing
requirements and interest expenditure.
Consolidated fiscal framework,
2010/11 – 2016/17
2010/11
R billion/percentage of GDP
Revenue
% of GDP
Non-interest expenditure
% of GDP
Interest payments
% of GDP
Expenditure
% of GDP
Budget balance
% of GDP
2011/12
2012/13
Outcom e
2013/14
Estim ate
2014/15
2015/16
2016/17
Average
annual
grow th
over MTEF
Medium -term estim ates
762.9
27.8%
842.3
28.3%
909.3
28.4%
1 010.5
29.2%
1 099.3
29.0%
1 201.3
28.9%
1 324.7
29.1%
9.4%
804.7
29.6%
871.4
29.4%
951.7
29.9%
1 041.6
30.3%
1 131.1
30.0%
1 218.1
29.5%
1 306.5
28.8%
7.8%
75.3
2.7%
81.7
2.7%
93.5
2.9%
107.7
3.1%
121.2
3.2%
133.5
3.2%
145.1
3.2%
10.5%
880.0
32.0%
953.1
32.0%
1 045.2
32.7%
1 149.3
33.2%
1 252.3
33.1%
1 351.6
32.6%
1 451.7
31.9%
8.1%
-117.1
-4.3%
-110.8
-3.7%
-135.9
-4.3%
-138.8
-4.0%
-153.1
-4.0%
-150.3
-3.6%
-126.9
-2.8%
-2.9%
Non interest expenditure
Interest expenditure
 The level of interest payments is determined by
total outstanding government debt and the cost
of debt.
 The estimates of interest expenditure are
susceptible to two distinct risks:
 Total government debt could grow beyond the
estimated level.
 The downgrade of SA’s sovereign debt by credit rating
agencies translate into higher interest costs on foreign
borrowing and government’s ability to borrow.
SA’s credit rating
 In June 2014, 2 credit rating agencies downgraded South
Africa’s sovereign credit rating.
 South Africa’s credit rating would be subjected to a further
downgrade if the economic position deteriorates.
 A further downgrade would raise foreign debt service costs.
 Government would have limited space to raise more debt to
fund future budget deficits.
 This would necessitate expenditure cuts on programmes.
 Such cuts would slow down the implementation of the
National Development Plan.
Priority programmes
To ensure performance on the outcomes of the NDP the national budget
is allocated towards programmes clustered together within functional
groups.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Quality basic education
A long and healthy life for all South Africans
All people in South Africa are and feel safe
Decent employment through inclusive growth
Skilled and capable workforce to support an inclusive growth path
An efficient, competitive and responsive economic infrastructure network
Comprehensive rural development
Sustainable human settlements and improved quality of household life
Responsive, accountable, effective and efficient developmental local government system
Protect and enhance our environmental assets and natural resources
Creating a better South Africa and contributing to a better and safer Africa in a better world
An efficient, effective and development oriented public service
An inclusive and responsive social protection system
Transforming society and uniting the country
Implications
 Slower growth
 Less revenue
 Higher budget deficit
 Higher cost to borrow
 Less funds for spending on programmes
 Outcomes of NDP compromised
 How do we respond?




Root causes of the constraints to economic growth
Reprioritisation
Efficiency gains
Monitor
Thank you