Budget Speech 2025Introduction |
Madam Speaker,
The postponement of the tabling of the Budget three weeks ago was a regrettable, but perhaps an understandable feature of multiparty governance.
It is a sign of a maturing and resilient democracy.
The delay has stimulated an unprecedented level of public debate about the difficult policy trade-offs we, as a nation, face.
A vital debate about which policies to fund and how to fund them. About which priorities to pursue now, and which ones we may need to delay in the context of our limited resources.
As much as the debate has been dominated by the proposed increase to value-added tax (VAT), the bigger debate must be about how we grow the economy for the benefit of the majority.
A bigger, faster growing economy, and the larger fiscal resources that comes with it, would give us more fiscal room to meet more of our developmental goals.
But the truth is that our economy has stagnated for over a decade. In that time, GDP growth has averaged less than 2 per cent, far below the level required to meet our expanding list of needs.
In 2024, the economy grew by only 0.6 per cent. Over the medium term, GDP growth is projected to average 1.8 per cent.
To meet our goals of redistribution, redress and structural transformation, the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration.
Today’s Budget proposes a bold and pragmatic approach to achieving this formidable task.
It calls for macroeconomic stability supported by sound fiscal policy. For the deepening of structural reforms to remove the obstacles to growth and job creation. And for scaling up infrastructure to unlock the productive capacity of the economy, while building a capable state that supports all these efforts.
The Budget remains committed to a balanced fiscal strategy.
As projected in the 2024 Medium Term Budget Policy Statement (MTBPS), a budget primary surplus of 0.5 per cent of GDP will be achieved in 2024/25, and this will grow to 0.9 per cent in 2025/26.
Government debt will stabilise, at 76.2 per cent of GDP in 2025/26, while the consolidated budget deficit also narrows, to 3.5 per cent by 2027/28.
Madam Speaker as debt stabilises, a growing primary surplus will enable the government to reduce debt-service costs as a proportion of revenue.
Some of those savings will be used to build up fiscal buffers that we need as protection against future economic shocks. Shocks like the COVID-19 pandemic, and other uncertainties stemming from the rising geopolitical tensions and the global economic ramifications thereof.
Debt-service costs will amount to R389.6 billion in the current financial year. This translates to 22 cents of every rand we raise in revenue. It is more than what we spend on health, the police and basic education.
We must reverse this trend and prevent the cost of debt from taking away resources that could otherwise be spent on our pressing social needs, or to invest in growth.
In this regard, our fiscal strategy stabilises debt service costs as a percentage of revenue in 2024/25 by maintaining a primary budget surplus.
The Eskom debt relief arrangements are also effective and contribute to the improved fiscal position.
Eskom is now in a much better financial position than in 2023 when the debt relief was originally announced.
As a result of these improvements, we have decided to simplify the final phase of the debt relief package.
The last R70 billion debt takeover will now be replaced with R40 billion in 2025/26, and R10 billion in 2028/29. This will result in a saving for the government of about R20 billion.
Honourable Members, these fiscal improvements are important milestones on our path to fostering a stable macroeconomic environment that is a prerequisite for a higher level of growth that promotes job creation, improves public services and reduces inequality.