Matambo reaches the edge with P7bn deficit
Mbongeni Mguni | Friday February 8, 2019 18:00
Although the minister did not clarify in his budget speech on Monday, the 2019/20 deficit is expected to be largely funded from borrowings and drawdowns from the foreign reserves.
Matambo however added that more would be squeezed out from fees, levies and charges, which currently contribute about four percent of total revenues.
The traditional major contributors to revenues are minerals, customs and excise under the SACU arrangement and non-mining tax, including VAT.
“With the downside risks associated with the main revenue sources of mineral, customs and excise, and income tax, it is important that government undertake a comprehensive review of the fees, levies and charges, with a view to determining their potential to contribute to total government revenues,” Matambo told Parliament.
“These revenue items, which are commonly referred to as “other revenues” in the budget, currently contribute around four percent of total revenues.
“My ministry intends to work with other ministries and departments during the next financial year to review fees and charges in line with the policy of cost recovery, while increasing their contribution to government budget.”
Government fees, levies and charges include items ranging from VISA fees, public health care charges, vehicle registration fees to various licence and permit fees. Levies, meanwhile fund about 33 special funds which include sectors such as fuel, youth, road transport, as well as tourism and alcohol.
The announcement is likely to cause concern amongst taxpayers, particularly in the area of levies, which leading economists have described as covert additional taxes.
Last May, Matambo announced an overhaul of the special funds in the wake of widespread abuse and diversion, as well as the failure to account by authorities in central and local government. The Finance Ministry had expected to run deficits in the first three years of National Development Plan (NDP) 11, which runs from April 2017 to March 2023. According to the Plan, the national budget was supposed to end the first three years of the NDP with a cumulative deficit of P18.4 billion.
Matambo’s forecast deficit for 2019/20 points to a cumulative deficit of P16.2 billion. However, the minister said the last two deficits, running at about -3.5 percent of gross domestic product (GDP), were cutting too close to the fiscal limits government has set for its budget shortfall.
He added that the situation was made more precarious by the expected impact of drought relief programmes, under which government in the past few years, has released hundreds of millions of pula for various interventions.
“As indicated under the budget review and proposals sections, the projected deficits for 2018/2019 and 2019/2020 of 3.5 percent of GDP for each year, are close to the set limit of four percent of GDP.
“These deficits exclude any additional expenditures that may arise from government decisions during the course of the year, or emergency spending occasioned by natural disasters such as drought and outbreak of animal diseases.
“I must indicate that the budget deficits experienced in the first three years of NDP 11, were a deliberate effort by this government to respond to the national needs of increasing economic activity to create employment opportunities, eradicating extreme poverty and equitable income distribution.”
Matambo’s numbers and projections are expected to be further analysed in coming weeks as legislators debate the budget. Various ministries are also expected to present their individual budgets, forecasts and underlying expenditures in the Committees of Supply due to start later this month.