South Africa is seeking to cut government budgets as it moves to contain debt after promising billions of rands to rescue its power utility and a weak economy damps tax collection.<\/p>\n
The National Treasury has asked departments to prepare proposals on how to reduce expenditure in a way that has the least impact on service delivery.<\/p>\n
It\u2019s seeking cuts of 5% for 2020-21, and 6% and 7% for the next two years, the Treasury said. That could be as much as R300 billion ($19.7 billion) over three years.<\/p>\n
This could be a first step in containing South Africa\u2019s budget deficit, which is projected by Fitch Ratings Ltd. to overshoot the government\u2019s forecast by almost 2 percentage points this year. That\u2019s after the Treasury pledged an additional R59 billion bailout for the power utility Eskom Holdings SOC Ltd.<\/p>\n
Spending cuts of that magnitude could placate credit ratings companies such as Moody\u2019s Investors Service, the last major firm to assess South Africa\u2019s debt at investment grade, and reduce the need for tax hikes.<\/p>\n
Moody\u2019s communication desk said by email it could not immediately respond to queries about this.<\/p>\n
Finance minister Tito Mboweni said in February the government will reduce its wage bill by about R25 billion over three years.<\/p>\n
This would be done by encouraging early retirement. State workers\u2019 salaries account for about 35% of the R1.8 trillion budget for the fiscal year that ends in March.<\/p>\n
Mboweni will present the mid-term budget statement with the spending framework for the next three years in October.<\/p>\n
Johannesburg-based Business Day newspaper reported on the spending cuts earlier on Thursday.<\/p>\n
Jackson Mthembu, the minister in the presidency, told reporters the Treasury hasn\u2019t briefed cabinet on proposed spending cuts, adding that Mboweni would soon present an \u201cholistic paper\u201d on the economy.<\/p>\n
President Cyril Ramaphosa is due to speak in Parliament later on Thursday on the economic challenges facing the economy.<\/p>\n
The government\u2019s plan to give Eskom R128 billion in assistance over three years will add to state liabilities and widen the fiscal shortfall.<\/p>\n
Fitch Ratings estimates the budget gap may climb to 6.3% of gross domestic product this year, and government debt to 68% of GDP in two years.<\/p>\n