Finance Minister Enoch Godongwana will on Wednesday present the 2024 Medium Term Budget Policy Statement (MTBPS), offering an updated view of the medium-term fiscal framework. Picture: Phando Jikelo, Independent Newspapers.
The International Monetary Fund (IMF) has indicated optimism that South Africa’s public finances will recover and that the National Treasury will manage to tame public debt on the back of fiscal consolidation.
Finance Minister Enoch Godongwana will on Wednesday present the 2024 Medium Term Budget Policy Statement (MTBPS), offering an updated view of the medium-term fiscal framework.
This will be the first MTBPS presented under the Government of National Unity (GNU), and it is expected to reinforce the government's ongoing fiscal consolidation efforts.
In February, Godongwana said debt will peak at 75.3% of gross domestic product (GDP) in 2025/26.
The IMF, in its latest World Economic Outlook, has already revised upwards South Africa’s economic growth projections for 2024 and 2025, forecasting GDP growth of 1.1% for 2024 from 0.9% previously, and 1.5% from 1.2% in 2025.
Abebe Aemro Selassie, IMF director for the African Department, on Friday said economic developments in South Africa were better since the IMF’s Article IV mission earlier this year.
Selaisse said an IMF team would be deployed to South Africa next month, which will be doing a comprehensive assessment of the latest data and “we’ll take that into account”.
“Some of the differences probably also are on account of the external environment. With cost now with funding, with the easing cycle that we’ve seen, the revision to interest rates, global path for financing conditions, I think those also will have material impact, particularly for South Africa -- on the debt outlook,” Selaisse said.
“We are very hopeful that the direction of policies in South Africa will remain one where the imbalances that have built up in the last couple of years are being addressed. And we are looking forward to having good discussions in the next month.”
According to the latest IMF Regional Economic Outlook for Sub-Saharan Africa released on Friday, Sub-Saharan Africa's economic growth is projected to remain subdued at 3.6% in 2024, unchanged from 2023, with a modest pick up to 4.2% expected in 2025.
The report notes that countries in the region are still grappling with macroeconomic imbalances, tight financing conditions, amid rising social pressures, leaving policymakers facing difficult choices in implementing reforms.
Selaisse said Sub-Saharan African countries were navigating a complex economic landscape marked by both progress and persistent vulnerabilities.
“While many of the region’s countries are among the world’s fastest-growing economies, resource-intensive countries —particularly oil exporters— continue to struggle with lower growth rates. Inflation is declining but remains in double digits in nearly one-third of countries. Public debt has stabilized at a high level, with rising debt service burdens crowding out resources for development spending,” he said.
"While we are seeing some improvement in macroeconomic imbalances, growth remains insufficient to significantly reduce poverty or address substantial developmental challenges in the region.”
The 2024 MTBPS will be presented against the backdrop of an improved macroeconomic environment as business sentiment is rebounding while political and policy uncertainty have eased.
Electricity supply has improved, lower inflation will facilitate more interest rate reductions, but the transport system constraints remain a drag on economic activity.
Although Godongwana will deliver the MTBPS supported by a more positive economic outlook, economists have warned that the public sector wage bill was still a significant drag in the 2025/26 fiscal year.
Economists expect a marginally lower budget deficit in the current fiscal year, at 4.4% of GDP compared to the National Treasury’s February 2024 estimate of 4.5%.
“We estimate a wider deficit due to the higher-than-budgeted wage settlements in FY2025/26,” said Nedbank economist Isaac Matshego on Friday.
“The public sector wage bill will re-emerge as a significant risk to expenditure restraint from FY2025/26. Wage negotiations have commenced as the current agreement ends in March 2025. The government has tabled a 3% offer, while unions have demanded 12%. Therefore, the settlement will likely exceed the NT’s 4.5% a year incorporated in the February 2024 Budget.”
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