Budget doesn't support economic growth, says PBO

The PBO’s Seeraj Mohamed said that the spending cuts the government was planning over the next three years did not – as Treasury has argued - strike a balance between immediate support for the economy and shoring up the country’s public finances.

FILE: Finance Minister Tito Mboweni delivers his Medium-Term Budget Policy Speech in Parliament on 28 October 2020 in Cape Town. Picture: GCIS.

CAPE TOWN - The Parliamentary Budget Office said that the Budget unveiled by Finance Minister Tito Mboweni last week did not support economic growth, nor the recovery and reconstruction of the economy.

The PBO, set up to advise MPs on budget-related matters, briefed a joint meeting of Parliament’s finance and appropriations committees on Tuesday.

FULL SPEECH: Tito Mboweni’s 2021 Budget

The PBO’s Seeraj Mohamed said that the spending cuts the government was planning over the next three years did not – as Treasury has argued - strike a balance between immediate support for the economy and shoring up the country’s public finances.

“So what we are arguing is that the Budget does not support growth during the MTEF (Medium Term Expenditure Framework), nor recovery and reconstruction…”

Mohamed said that a big risk to rebuilding the economy in the COVID-19 pandemic was that there are not enough direct budgetary interventions to grow demand for goods and services and to drive investment, job-creation and growth.

“Key components of the government's approach are off-budget; these include structural reforms and a fund to leverage private infrastructure investment.”

Mohamed added that despite successes with Operation Vulindlela – aimed at opening the way for infrastructure investment, especially in transport and telecommunications – there was no clear time frame for these structural reforms that the economy needed.

“Uncertainty remains high and private businesses prefer to keep their assets liquid in financial assets rather than sunk in fixed investment projects for years.”

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