Minister of Finance Trevor Manuel’s 10th Budget, tabled in Parliament on Wednesday, reflects the correctness of the government’s economic policy path since coming to power in 1994, President Thabo Mbeki said on Friday.
Writing in his weekly newsletter on the ANC’s website, ANC Today, he noted widespread praise in the media and elsewhere for the 2006/07 Budget.
Mbeki said the ”greater impetus to social development and public service delivery” mentioned in the Budget Review document is reflected in increased annual and medium-term spending on various sectors.
By any standard, these represent very large expenditures, and meaningful annual and medium-term increases.
”But perhaps more dramatic is the fact that these outlays will be met almost exclusively from tax and other resources that will accrue to government, without borrowing.
”This means that our government will carry these enormous expenditures without having to borrow unsustainably large sums of money from the financial institutions.
”In other words, the ‘impetus’ to which the Budget Review referred will not be financed by generating a significant Budget deficit,” Mbeki said.
The government projects that state debt cost as a percentage of gross domestic product (GDP) will drop during the Medium-Term Expenditure Framework period from 3,3% to 2,7%.
During this time, the Budget deficit will rise from 0,5% to 1,2% of GDP.
”To understand the scale of the turnaround with regard to the state debt cost, we should remember that by 1992/93, immediately preceding our liberation, the overall Budget deficit had reached 7,9% of the GDP.”
In his Budget speech, Manuel said part of the answer to the phenomenal progress made lay in financial policy and debt management.
In 1998, for every rand of revenue collected, 24 cents was spent on servicing state debt. In 2005, the debt cost 14 cents, and by 2009 it will be 10 cents.
”To put this differently, this means that in 1998 from every rand of revenue, our government had to pay 24 cents to the financial institutions from which it had borrowed money to finance the Budget deficit, remaining with 76 cents to meet the needs of our country and people.
”Thanks to the manner in which our government has managed the public finances, the sum available in 2005 to address these needs had grown to 86 cents. It will rise to 90 cents by 2009,” he said.
These achievements have created more state resources to address the needs of the people, and are a result of the work the government has been doing to implement the decisions of the tripartite alliance and the rest of the broad democratic movement to achieve the correct macro-economic balances mandated by the Reconstruction and Development Programme (RDP) document adopted in 1994.
In his speech, Manuel also made the observation: ”In the noise and haste of economic policy debate, we forget too easily that there are long lead times in the practical implementation of policy.
”Our present economic performance reflects the choices we made a decade ago, and the economic reforms now in progress will yield their returns five and 10 years from now.
”There are no joys without the nightmares that precede them and spring them into light.”
Mbeki said Manuel was referring to what the government had done to implement the macro-economic proposals contained in the 1994 RDP document, through the Growth, Employment and Redistribution Programme (Gear) adopted by the government in 1996.
Through Gear, and consistent with the RDP, the government had therefore decided to implement an integrated reform programme.
”As a result of the implementation of this programme, leading to the reduction of the public debt, lower inflation and interest rates, and manageable balance of payments ratios, as well as the growth of our economy, we now have a larger volume of resources to meet the needs of the people and accelerate the rate of growth and development of our economy, the two central matters addressed in our government’s 2006/07 Budget,” Mbeki said. — Sapa