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Mboweni’s balancing act of a ‘shattered’ economy

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Minister of Finance Tito Mboweni has been dealt a heavy hand. Barely two weeks after his appointment to the ministry, he is delivering his median Medium-Term Budget Policy Statement in Parliament on Wednesday.

Before going into details on the path that government will approach regarding its finances, Mboweni says although times are tough in the economy “we can either remain pessimistic or optimistic of the future.”

“As a country, we stand at a crossroad. We can choose a path of hope; or a path of despair,” said Mboweni.

Mboweni has committed government to spending R5.9 trillion over the next three years in education, health, water and electricity services, and social grants. All this whilst trying to keep the spending ceiling minimum.

For his 2018/19 budget, Mboweni has committed that there will not be any key changes in the distribution of national funds.

Of the R1.7 trillion allocated to consolidated expenditure in 2018/19, 15% goes to basic education, 12% to public health and another 12 % to social protection.

Commitments made by the President

Tied to the economic pressures,  the Minister has to take in consideration the commitments made by President Cyril Ramaphosa to stimulate the economy. These commitments are  vastly dependent on private-sector investment to ensure that the economy expands  on an upward trajectory.

Growing the economy has not only become one of the major goals for Mboweni but largely government as well as the ruling African National Congress (ANC).

In the run-up to his election as head of the ANC, President Ramaphosa promised to deliver a better economic environment and reignite economic growth.

With the economy being confirmed to be in a technical recession after negative growth in the second quarter of 2018, Mboweni’s budget has set out expectations of improved economic performance.

However, with the growth forecast for 2018 being revised down from 1.5% to 0.7% Mboweni has had very little room to work with, but has instead looked to ensuring stability at the moment to ensure that future anticipated growth rates of 2.3 % can be achieved by 2021.

Although not having been in the hot seat for long, Mboweni will have to make difficult decisions in his 2019 budget speech to ensure more rapid economic growth and sustainable public finances.

Read Minister Mboweni’s full MTBPS below: 

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