Any large permanent increases in spending, such as a new basic income grant, cannot be accommodated without matching permanent increases in revenue, says the National Treasury.<\/p>\n
Presenting to parliament on Tuesday (22 March), Treasury’s Ismail Momoniat explained that this type of recurring spending cannot be funded by borrowing money, but would have to be drawn from new revenues in the tax system.<\/p>\n
He added that permanent tax increases will also be necessary to fund other social programmes such as the planned National Health Insurance (NHI) scheme – meaning the government will have to carefully consider who and what it taxes.<\/p>\n
Momoniat said that the country’s fiscal outlook is already subject to significant risks, even before accounting for Russia’s invasion of Ukraine and its impact on global markets.<\/p>\n
“These include weakening of global or domestic economic growth, rising global borrowing costs, the possibility of higher public\u2010service wage costs, and the poor financial condition of several major state\u2010owned companies,” he said.<\/p>\n
He added that economic growth remains low, with Treasury projecting real economic growth of 2.1%\u00a0 in 2022, the year in which the economy is expected to return to pre- Covidpandemic production levels. GDP growth is further expected to average 1.8%\u00a0 over the next three years, he said.<\/p>\n