Medium Term Budget Policy Statement 2021 commentaries

After the Medium Term Budget Policy Statement 2021 (MTBPS – or “mini-budget” as it is more colloquially known) tabled on 11 November 2021, two insighful commentaries.

The first by Michael Sachs (former head of the Budget Office in the National Treasury of South Africa) contends, inter alia, that the sharp fiscal contraction of more than 10% per annum in real public spending per capita between 2022 and 2023 which National Treasury proposes to stabilise public debt is contingent on number of assumptions. These include that the civil service wage bill will be contained and that employment in the public sector will fall. He observes:

“The plan to hold down pay improvements this year has not worked out. Public servants negotiated an effective increase in average pay of more than 5%, in line with inflation, and headcount numbers have surged during the Covid crisis, especially in the health sector. The idea that public servants will accept 1.5% next year and the year after might be a good negotiating tactic but weakens the credibility of the fiscal framework.”

To read the full article, please click the link below:
The MTBPS clears some fiscal space but it is still a path through a swamp

The second commentary by Thabi Leoka contends that the rate of public debt accumulation has far exceeded the growth rate of the South African economy which has averaged only about 1% over the last decade, and that fiscal consolidation and the implementation of structural reforms in – for example – the energy, telecommunication and transport sectors, are critical for driving sustainable economic growth.
The MTBPS makes a start: now we need the policies for growth

Both commentators note the temporary windfall effect of higher commodity prices which has helped to cushion the South African economy and mask some of the structural effects of the fiscal crisis which is being exacerbated by the prolonged COVID-19 pandemic.