Increasing state expenditure won’t necessarily translate to economic growth: Treasury

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The National Treasury says increasing government’s expenditure will not necessarily translate into economic growth.  Senior officials of the department were responding to calls by trade unions and civil society groups for government to increase its expenditure.

There’ve been calls for the state to invest heavily in infrastructure such as roads, ports and dams.

The civil society groups and unions were making submissions before Parliament’s Finance Committee on the supplementary budget tabled by the Finance Minister Tito Mboweni two weeks ago.

However, Treasury says government’s expenditure has in fact increased from 27% of GDP in 2009 to just over 32% currently.

None of these increases has either led to any significant growth or increased investment.

The Treasury warned that unsustainable expenditure could lead to higher debt and job losses. However, Cosatu and other civil society groups say more spending on infrastructure, tackling corruption and introducing a wealth tax can boost growth and create new jobs.

They say government can avoid the debt trap by stimulating the economy and tackling factors such as corruption.

Treasury insists on massive structural reforms and creating an enabling environment for growth. Those will include slashing the wage bill and restructuring Eskom to provide affordable and reliable electricity, among others.

Treasury on Saturday warned that failure to contain the spiraling national debt will result in debt servicing costs consuming more than 31% of the total budget in four years.

It said it can take steps to avoid a debt crisis and place the economy on a path for potential and real growth.

Treasury also warned against the use of Government Employee Pension Fund to service government’s debt, saying fiscal sustainability will not be achieved if the country spends today what has been saved for tomorrow.

In the video below, the National Treasury denies claims it wants to change laws governing pension funds: