TREASURY has proposed to drastically reduce the National Budget deficit in 2019 through interventions such as limiting Government borrowing from the central bank, tightening of Treasury Bills issuances and cutting travel and wage bills.
Finance and Economic Development Minister Professor Mthuli Ncube, in a Pre-Budget Strategy Paper approved by Cabinet on Tuesday, said re-orientation of expenditures from consumptive spending to developmental priorities would be key in the 2019 Budget.
He said he will right-size public employment; rationalise posts in the public service, strengthen wage bill management, reduce travel expenditures and review expenditures on fuel benefit levels from January 2019.
Treasury will also curtail acquisition and provision of vehicles by the State, including replacement of condition of service vehicles, enforce measures on the use of Government Operational Vehicles by public officers, rationalise foreign service missions, review of parliamentary sitting allowances and limit expenditures on by-elections.
“The 2019 Budget Strategy Paper proposes drastic reduction of the budget deficit to 5,2 percent of Gross Domestic Product (GDP) in 2019, and subsequently to 3,5 percent in 2020 and 3,1 percent of GDP by 2021, making us comply with the SADC threshold of below 3 percent of GDP,” said Prof Ncube.
Turning to the debt to GDP ratio, Prof Ncube said urgency was needed to contain the fiscal deficit as international best practice and SADC adopted thresholds for sustainable public indebtedness are pegged at 60 percent of the GDP.
The Public Debt Management Act requires that total outstanding Public and Publicly Guaranteed Debt as a ratio of GDP should not exceed 70 percent at the end of any fiscal year.
“By end of 2018, it is estimated that the statutory limit of 70 percent is likely to be exceeded in view of the current borrowing trends from the domestic market,” said Prof Ncube. “This underpins the urgency for containing the fiscal deficit.
“Hence, it is prudent that this threshold be observed, a situation which will also contain our budget deficits.”
Prof Ncube said among the measures to contain the budget deficit was limiting Government borrowing from the central bank which surpassed 27 percent in 2017 against the stipulated 20 percent.
He said there would be a new Treasury Bill Issuance Framework in order to ensure that Treasury Bills are issued guided by adequate analysis and proper validation.
Issuances will be governed by a framework that goes beyond generation of correspondence to the Reserve Bank.
“Issuances of Treasury Bills will, therefore, be strictly aligned to the parliamentary approved borrowing requirements, and votes under an Appropriation Act,” he said. “This will ensure that no expenditure of public monies is incurred on any service where provision has not been made by or in terms of the Public Finance Management Act or any other enactment.”
Prof Ncube said the Reserve Bank, as a banker to Government, would only issue Treasury Bills via a Treasury Bill issuance note by the Accountant-General.