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MTBPS Hearings 2002 Mazwai Securities 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 Mazwai Securities Meeting of Expenditure Objectives • 1/2 Stated objectives – – • real growth in expenditure on public services with particular emphasis on social services and enhancing municipal infrastructure and services Efforts to achieve objectives – – – – 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 Mazwai Securities 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 Mazwai Securities 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 Mazwai Securities 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 Mazwai Securities