SA economy expected to contract by 7.2%: Mboweni

Finance Minister Tito Mboweni says the government expects the South African economy to contract by 7.2% in 2020 as the coronavirus ravages the world and the local economy.

Mboweni was delivering his special adjustment bill, on Wednesday, as the country battles the pandemic.

The Finance Minister says South Africa has accumulated too much debt and the coronavirus lockdowns will make the situation even worse.

Mboweni says the Ramaphosa administration is focused on helping South Africa position itself for economic recovery after the coronavirus. He adds that they are faced with a massive task in closing the mouth of the hippopotamus.

‘Debt expected to rise’

Mboweni says debt is expected to rise to around 81% of Gross Domestic Product (GDP). This is substantially higher than the 65% of GDP forecast by the government in February before the lockdown.

“This year, out of every rand that you pay in tax, 21 cents goes to paying the interest on our past debts.”  “Our Herculean task is to stabilise debt,” Mboweni explains.

However, he says the government will work to stabilise the debt at around 87% of GDP by the 2023-24 financial year.

The Treasury has warned that finances are overstretched and the country could face a sovereign debt crisis if it does not act fast.

The Minister has confirmed that the process of zero-based budgeting will be used in the future and resources will be allocated on a needs basis.

Minister Tito Mboweni tables the supplementary budget: 

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Consolidated Budget Spending

Projected total consolidated budget spending, including debt service costs, will exceed R2 trillion for the first time ever.

SA is already R35.3 billion behind in tax collection in past two months

SA is already R35.3 billion behind on our 2020/21 target. (Gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to our initial forecast for the same period of R177.3 billion)

Tax Revenue Shortfall

R300 billion Tax Revenue Shortfall (Gross Tax Revenue for the 2020/21 fiscal year is revised down from R1.43 trillion to R1.12 trillion)

Below is Minister Mboweni’s Full Supplementary Budget speech: 

Source: SABC News (sabcnews.com)