Revenues collected by the South African government in the first two months of the new 2003-04 fiscal year are so far lagging those received in 2002, according to the latest monthly data on revenue, expenditure and borrowing released by the National Treasury.
By May 31, the Treasury had received some R35,1-billion in revenue, or 11,5% of its total 2003-04 budgeted amount of R304,5-billion. This is R1,8-billion lower than the total of R36,9-billion in revenue recorded a year earlier.
May 2003 revenues totaled R19,6-billion, compared to R20,2-billion a year earlier.
While the lower numbers may not yet be a cause for concern, given that it is only two months into the financial year, economists are keeping a close eye on the figures because the government’s budgeted revenue totals are based on an annual real economic growth rate of 3,3% for 2003.
However, actual economic growth has been lower than this, registering 2,5% y/y in the first quarter of the year (down from 3% y/y in the fourth quarter of 2002), as the stronger-than-expected rand and weak international demand, among other factors, took a toll on growth in local manufacturing and exports.
Many economists have revised their original 2003 growth forecasts for South Africa downward in recent weeks, some to as low as 1,8% y/y. Should actual growth be much lower than the government’s 3,3% projection, the South African Revenue Service (SARS) will have a very difficult time meeting its revenue target for the year, thus driving the government’s budget deficit higher than expected.
This would be a reversal from the pattern of previous years, which have seen much higher-than-budgeted revenues resulting in lower government deficits than budgeted.
The government’s 2003-04 budget provided for higher government spending and
a wider budget deficit to help speed up delivery of key programs focused on education, social grants, health and infrastructure, among other areas.
According to the latest Treasury data, government expenditure for the 2003-04 financial year to date has totaled R50-billion, up from R47,5-billion rand over the same period a year earlier. In May expenditure fell slightly to R23,7-billion, but this was still higher than the R23,5-billion spent in May 2002.
The Treasury’s net financing for the 2003-04 financial year to date totaled R14,9-billion as at end-May, rising by R4,1-billion in May. This compared to financing of R10,8-billion over the same period a year earlier.
Net domestic short-term loans fell by R2,1-billion in May for a year-to-date amount of -R1,8-billion, while net domestic long-term loans rose by R3-billion in May for a total of R10,4-billion year-to-date.
Foreign loans of R10,6-billion were taken up in May (from the government’s 1,25-billion euro eurobond issue), for a total of R11,6-billion so far, and there was an increase in cash and other balances in May of R7,4-billion, for a year-to-date total increase of R5,3-billion. – I-Net Bridge