President Jacob Zuma has directed the Minister of Finance, Malusi Gigaba, to trim down expenses and increase revenue in order to find a solution to the R40 billion gap identified in the Medium-Term Budget Policy Statement.
“The President [and] Cabinet have reaffirmed government’s commitment to maintain a sustainable fiscal framework and ensure that a solution is found to address the roughly R40 billion gap that has been identified, through a combination of expenditure reductions and revenue-enhancing measures,” said the Presidency in a statement.
The Presidency on Monday released a statement on the measures being taken to address economic challenges after Standard & Poor’s lowered South Africa’s long term foreign and local currency debt ratings by one notch each to ‘BB’ and ‘BB+’ on Friday.
On the other hand, Moody’s gave South Africa some reprieve by maintaining the country’s credit rating above junk at Baa3. The ratings agency placed South Africa’s long-term foreign and local currency debt ratings of ‘Baa3’ on a 90-day review for a downgrade.
The Presidency on Tuesday said the Finance Minister will be assisted by the Presidential Fiscal Committee to find solutions to the challenges.
President Zuma has directed that technical discussions of the Presidential Fiscal Committee take place, led by Minister Gigaba and National Treasury. These discussions will focus on four areas, which are:
- To identify and finalise proposals for cuts in expenditure amounting to about R25 billion. Such proposed cuts should not be in areas that will negatively affect economic growth prospects and job creation;
- To identify and finalise proposals for revenue-enhancing measures amounting to about R15 billion, including where appropriate, tax measures;
- To develop a phased-implementation plan to enable the proposal for fee-free higher education for students from poor and working-class backgrounds, to be implemented in a fiscally-sustainable manner, and
- To identify the package of economic stimulus measures that will be implemented to enable the economy to grow at a faster rate.
The President has directed that the contents of these discussions should be considered for preparations of the 2018 Budget.
President Zuma will in the coming days meet with the Presidential Fiscal Committee to receive a progress report on the work done on the above.