The South African government is on track to achieve its first ever fiscal year surplus, if the trends established in the first four months remain intact.
In the first four months, revenue rose by 21,2% year-on-year (y/y), while expenditure increased by 12,2% y/y.
If these trends are extrapolated for the full fiscal year, then the government will achieve an R8-billion surplus.
The National Treasury in February 2005 forecast that the deficit would increase by about 130% to R47,95-billion, but has since acknowledged that a surge in revenue in March 2005 means that the deficit would be at least R10-billion less.
The 2004/5 fiscal deficit was only R20,733-billion compared with R29,345-billion in the 2003/4 fiscal year and a budgeted R41,948-billion given in the February 2004 Budget.
The 50,6% reduction in the 2004/5 deficit compared with the budget was due to far higher revenue than expected, with revenue for the fiscal year rising by 16% to R347,291-billion, while expenditure increased by 12% to R368,024-billion.
Many economists and capital market participants cannot accept the evidence of the past 20 months and keep on saying that a fiscal year surplus is very unlikely, in part because South Africa has never had one.
The July data in fact suggest that an R8-billion surplus is conservative, because if July’s growth rates, which are, after all, the most recent and therefore should have the greatest weight, are extrapolated, then the surplus will be more than R50-billion.
The government’s revenue rose by 26,9% y/y in July compared with a budgeted increase for the full fiscal year of only 6,5%, while expenditure rose by only 5,5% y/y in July to R28,092-billion compared with a budgeted increase for the full fiscal year of 13,5% forecast in February.
The fiscal deficit plunged by 85,4% y/y in July 2005 to only R739-million, while the cumulative deficit is only R8,2-billion for the first third of the fiscal year, R7,1-billion less than the same period last year.
If there is a further R7,1-billion reduction in the fiscal deficit in each of the two remaining thirds of the fiscal year, then the government will have a R6-billion surplus at the end of the fiscal year. – I-Net Bridge