Fiscal deficit soars in January as spending surges

The fiscal deficit soared by 45.9% year-on-year (y/y) in January to R60.3 billion, as spending soared by 20.9% y/y to R139.7 billion, while revenue only grew by 7% y/y to R79.4 billion.



The spending surge is most probably due to department heads telling their staff to get on with it in terms of spending their budget, as government departments in the past have been notorious for not spending their capital allocations.

In December 2018 government spending was only 81.0% of budget compared with 82.1% in December 2017.

The revenue data since October has been distorted by Personal Income Tax (PIT) and Value-Added Tax (VAT) refunds, so one should exclude these two categories when doing year ago comparisons.

In October for instance, PIT refunds jumped to R4.9 billion in October 2018 from R2.8 billion in October 2017, while VAT refunds soared to R23.8 billion from R15.8 billion.

On a ceteris paribus basis, if the “extra” R10.1 billion in refunds had not taken place, then revenue growth would have been 19.3% y/y instead of the actual 5.7% that was reported.

The distortion in January was not as bad as PIT refunds rose to R1.6 billion in January 2019 from R1.4 billion in January 2018, while VAT refunds grew to R22.5 billion from R20.6 billion.

In the first six months of the current fiscal year, revenue increased by 10.7% y/y, while expenditure only grew by 6.0% reducing the fiscal deficit by 11.7%.

In the first nine months, the reported revenue growth slowed 7.8% as the accelerated refunds distorted the data, while spending slowed even further to 4.6%.

For the full fiscal year, Treasury in October 2018 forecast that revenue growth would only be 8.5%, while the expenditure increase would be 7.7%.

This was changed in the February 2019 Budget to 7.5% and 7.9% respectively.

This contribution to Finance Friday was made by

Helmo Preuss

Forecaster Ecosa cc

+27 79 773 2458


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