Treasury introduces discussion document on fiscal anchors proposal
This is part of plans to help curb excessive borrowing and improve public sector efficiency by setting clear, usually unbreachable, targets for debt, deficits, or expenditures.
Finance Minister Enoch Godongwana takes questions from the media about the 2025 budget tabled in Parliament on 12 March 2025. Picture: GCIS
JOHANNESBURG - After some push and pull to get the ball rolling on talks for a fiscal anchor, Treasury has now introduced a discussion document on the proposal.
During the revised budget statement at the National Assembly on Wednesday, Treasury also published a 35-page discussion document on fiscal anchors.
This is part of plans to help curb excessive borrowing and improve public sector efficiency by setting clear, usually unbreachable, targets for debt, deficits, or expenditures.
Some at Treasury, including Finance Minister Enoch Godongwana, had previously raised concerns that anchors would limit policy options.
Repeated attempts to stabilise debt have been undermined by delays in fiscal adjustments, leading to higher interest rates and slowing growth.
Without intervention, high debt levels will continue to constrain economic growth, deter investment and elevate already-high borrowing costs.
The International Monetary Fund (IMF) and the World Bank are among the global institutions that have called for South Africa to reform its fiscal policy to improve fiscal credibility, strengthen budget discipline and foster investor confidence.
South Africa’s Public Finance Management Act already makes provision for how fiscal policy is developed in the country.
If a fiscal anchor were to be introduced, the architecture would take one of two forms, including a numerical fiscal rule “to introduce binding limits on debt levels or fiscal deficits”.
In this instance, a debt ceiling would be used to cap government borrowing at a predefined level relative to GDP.
This scenario is complex and would require well-defined escape clauses for economic downturns or emergencies.
The alternative would be the parliamentary procedures model, which would "integrate fiscal sustainability principles into the process of tabling and voting on budgets".
Last year, the African National Congress (ANC) reportedly spoke out against the World Bank and IMF's calls for South Africa to look into calls for a fiscal anchor. The party preferred a shift to responsible spending.
The Democratic Alliance (DA) also proposed a responsible spending private member’s bill which "introduces statutory fiscal rules aimed at containing national debt and debt service costs".
Focusing on consumption expenditure and excluding capital expenditure from any adjustments, these rules would "implicitly encourage … government to invest more in capital projects". In addition, the bill seeks to subject fiscal control to parliamentary oversight.