SA’s main budget gap at 11.2% of GDP, beating forecast

South Africa’s main budget deficit for the 2020-21 fiscal year is smaller than the government projected after spending that undershot estimates and an upside revenue surprise.

Africa’s most-industrialised economy recorded a shortfall of R551.9 billion ($38.1 billion) or 11.2% of gross domestic product, on its main budget for the year through March 2021, the National Treasury said in an emailed response to questions. That compares with a revised estimate for a gap of 12.3% of GDP that Finance Minister Tito Mboweni presented on February 24.

The better-than-expected outcome means the deficit on the consolidated budget, which includes total spending by the provinces, social security funds and selected public entities, could be less than the Treasury’s projection of 14% of GDP.

The smaller deficit comes as main budget spending for 2020-21 was R16.2 billion less than the February estimate and revenue collected by the tax agency exceeded forecasts for the first time in five years. That’s allowed the Treasury to announce a R900 million cut to its weekly debt auctions on Monday, the second reduction in the amount on sale since March.

The Treasury said in February achieving a primary budget surplus is its most critical fiscal anchor. It projects a positive primary balance of 0.1% of GDP in 2024-25, which will allow the government to stabilize the debt ratio at 88.9% of GDP in the following year.