South Africa’s National Treasury proposed introducing a new fiscal anchor as part of measures to contain rising debt and regain the country’s fiscal credibility.
The recommendation forms part of a plan presented to President Cyril Ramaphosa last week. Its submission came after the Treasury warned that spending cuts may be needed to counter revenue shortfalls and a wider-than-expected budget deficit. Fiscal pressures have been compounded by calls for the government to extend a R350 monthly welfare grant that was introduced in 2020.
Data released by the central bank in June showed the Treasury missed its target of achieving a primary budget surplus in the 2022-23 fiscal year, which would’ve been the first positive balance since the global financial crisis. The rules, which should preferably be legislated “should be set in accordance to a desired target and include a mechanism which government can control,” it said. The Treasury warned that the proposed changes were not a panacea for the country’s problems, and the government will still have to stay the course when it came to ensuring there was “a clear and stable macroeconomic framework, more rapid and decisive implementation of economic reforms and improved state capability.
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