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UPDATE 1-South Africa pledges to cut deficit, curb debt in mid-term budget

reuters.com · 11/11/2021 07:10
UPDATE 1-South Africa pledges to cut deficit, curb debt in mid-term budget

Adds detail, context

- South Africa's National Treasury on Thursday pledged to cut the deficit and curb debt in its mid-term budget, saying it would not commit to new long-term spending despite a windfall from high commodities prices.

Africa's most industrialised nation was hit hard by the COVID-19 pandemic last year, but its economy bounced back unexpectedly strongly in 2021 as global demand for its exports, such as metals, surged.

The Treasury now sees the deficit at 7.8% of gross domestic product (GDP) this fiscal year, versus the 9.3% forecast in the main February budget, and gross debt peaking at 78.1% of GDP in 2025/26 versus the 88.9% seen in February.

The improved projections were influenced by a GDP rebasing by the statistics agency in August. nL1N2PW0JO

The Treasury said it would stick to a disciplined fiscal strategy and set a new target of narrowing the deficit to 4.9% of GDP in 2024/25, the last year of its medium-term expenditure framework.

The plan is to achieve a primary budget surplus, meaning revenue will exceed non-interest spending, from 2024/25.

The Treasury now sees GDP expanding 5.1% this year, compared to the 3.3% predicted in February.

"The economy has recovered more quickly than anticipated. Nevertheless, the recent spike in commodity prices, which has supported GDP growth and tax revenues, is considered temporary," it said in its budget review.

"Government will not commit to new long-term spending in response to temporary revenue windfalls."

(Reporting by Alexander Winning and Olivia Kumwenda-Mtambo;
Editing by Kirsten Donovan)

((alexander.winning@tr.com; +27 10 346 1076))