Wednesday, January 19

SA has the first quarterly primary surplus in three years

South Africa posted its first quarterly primary budget surplus since 2018 in the three months to June, a sign that the National Treasury’s efforts to align spending with revenue are succeeding.

The government’s primary balance turned to a surplus of R9.8 billion ($ 652 million), or 0.6% of gross domestic product, in the first quarter of fiscal year 2022, compared to a deficit of 2.2 % of GDP in the previous three months. according to the Reserve Bank of South Africa Quarterly Bulletin released Tuesday. A primary surplus, which excludes interest costs, suggests that the state can extract the resources from the economy necessary to pay the debt.


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This year, the Treasury shifted its focus to making a primary budget surplus its most critical fiscal anchor, rather than a spending ceiling.

In February, the Treasury projected a primary surplus of 0.1% of GDP in 2024-25, pointed to a positive balance of 0.3% of GDP in the long term and saw debt stabilize at 88.9% of the GDP in fiscal year 2026. The medium-term budget scheduled for November 4 is likely to show an improvement in these metrics, after changes in the way GDP is calculated showed that the economy is larger than as previously estimated and with tax revenues that exceed estimates due to a windfall in mining profits.

The government is “on track” to achieve a primary surplus by the middle of the decade, Edgar Sishi, acting head of the Treasury budget office, said last week at a tax conference.

While the latest data reflects an improvement in economic activity since the height of restrictions to curb the coronavirus pandemic, South Africa remains stuck in its longest downward cycle since World War II.

Weakening cycle

The economy entered the 94th month of a weakening cycle in September, according to official data. However, South Africa may have already entered an upward cycle given the strong recovery in output from 2020, when the economy contracted the most in at least 27 years, the central bank said in an emailed response to questions.

The central bank monitors more than 300 indicators representing economic processes such as production, sales, employment and prices to determine the direction of the trend and is partially awaiting the revised data to identify a turning point, he said. The last great cycle of economic decline lasted 51 months between 1989 and 1993, when the previous white government renewed the state of emergency and the country prepared for its first democratic elections.

Other key points:

  • Gross credit debt for the first quarter of the current fiscal year was 68.8% of GDP. That compares with the Treasury’s February budget estimate of 80.3% of GDP in the prior year and 81.9% for the current fiscal year.
  • There were inflows of foreign direct investment of R17.4 billion in the three months to June, compared with R6.1 billion in the previous quarter.
  • Portfolio investment inflows of R4.9 billion were recorded, compared to outflows of R6.4 billion in the first quarter.

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