The 2019 Budget addresses immediate risks to the economy and the public finances, and outlines measures to build the capacity of the state and renew economic growth. South Africa continues to confront a challenging economic environment in which global growth is slowing and trade tensions are mounting. The medium-term economic outlook has been revised down and tax revenues have significantly underperformed. In recent months it has become clear that Eskom requires urgent financial support and operational reforms. To tackle the Eskom risk, government is restructuring the electricity sector. Relative to the 2018 Medium Term Budget Policy Statement (MTBPS), departments’ budget baselines have been reduced by R50.3 billion, with roughly half of this amount relating to compensation. These reductions are offset by provisional allocations of R75.3 billion over the next three years, mainly for Eskom’s reconfiguration. As a result, the expenditure ceiling is increased by R16 billion over the next three years. Government remains committed to managing the budget deficit and containing public debt at sustainable levels. Changes to the medium-term expenditure framework result in the main budget deficit widening to 4.7 per cent of GDP in 2019/20 and then narrowing to 4.3 per cent of GDP by 2021/22. As a percentage of GDP, gross loan debt increases over the next three years and stabilises at 60.2 per cent in 2023/24, which is marginally above the 2018 MTBPS estimates.
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