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<\/a><\/p>\nThe cabinet has backed Mboweni\u2019s plan to target a primary budget surplus by 2023-24 and this week\u2019s budget announcement is expected to outline plans to cut government spending by 230 billion rand over the next two years.<\/p>\n
However, austerity could hinder the recovery of an economy that\u2019s expected to contract by 8.5% this year, according to a separate Bloomberg survey. It could also face opposition, including from labor groups aligned to the ANC.<\/p>\n
Plans to reduce the public-sector wage bill, which has climbed by 40% over the last 12 years, have stalled and the Treasury has warned a bid by unions to compel the state to honor a salary deal would lump the country with R37.8 billion rand of additional debt.<\/p>\n
The minister also faces pressure to find money to bail out South African Airways, arms manufacturer Denel SOC Ltd and the Land and Agricultural Development Bank of South Africa.<\/p>\n
The \u201cgovernment and the finance ministry are going to have an avalanche of requests in the coming months,\u201d said Mike Schussler, chief economist at Johannesburg-based Economists.co.za.<\/p>\n
What Bloomberg\u2019s Economist Says…<\/p>\n
\u201cFinance minister Tito Mboweni has tied himself to the mast with an ambitious plan to drastically cut expenditure and move toward debt stabilization by 2023-24. We think the scale and pace of his envisioned consolidation is unlikely to materialize or put debt back on a sustainable pa.<\/p>\n
“Instead, it risks plunging the country into an even deeper crisis. A more credible strategy in our view, is big stimulus now, accelerated reform, and a credible commitment to cut expenditure when the recovery has gathered pace.”<\/p>\n
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