Gordhan may outline tough budget policy

Finance Minister Pravin Gordhan’s medium-term budget policy statement to be tabled in Parliament later this month would be “good, strong and optimistic.”

CAPE TOWN — Finance Minister Pravin Gordhan’s medium-term budget policy statement to be tabled in Parliament later this month would be “good, strong and optimistic,” but would also send a tough message, the government’s chief spokesman Themba Maseko said yesterday.

These were the first albeit very vague hints of the broad thrust of the long awaited document which will enunciate the Treasury’s view of economic trends and provide the latest details on government expenditure and revenue.

Cabinet ministers, provincial premiers and finance MECs were briefed by Mr Gordhan yesterday on the budget policy statement which will be tabled on October 27. The document will update the state ’s forecasts for economic growth, inflation and the budget deficit.

Mr Gordhan is also likely to use the occasion to pronounce on the strengthening of the rand amidst strident calls that the government take action to stem the damaging effect it is having on SA’s exports.

Further indications of the Treasury’s views could also emerge today when Mr Gordhan appears before Parliament’s finance committees for a briefing on the annual reports of his department, and when he addresses the Cape Town Press Club and the Parliamentary Press Gallery Association later in the day.

Mr Gordhan has just returned from meetings of the World Bank and International Monetary Fund (IMF) in Washington DC and will no doubt provide insights into global economic and financial trends.

In using the words “good” and “optimistic”, Mr Maseko could have been referring to the fact that economic growth so far this year has exceeded the forecasts Mr Gordhan made in his February budget. Tax collections are also expected to have outstripped projections, though the beneficial consequences of this for the budget deficit would have been undermined by the higher-than-budgeted for public sector wage hikes.

The government would therefore still need to be “tough” in enforcing its austerity measures and Mr Gordhan will probably warn that the early signs of improvement should not be seen as the signal for any relaxation of belt-tightening.

Also on the agenda this month is the Cabinet discussion of the strategy for job-creating economic growth produced by the Department of Economic Development led by Minister Ebrahim Patel. Mr Maseko said October 21 had been set for this discussion though this might change if Mr Gordhan has to travel to South Korea for an IMF meeting.

The government welcomed the official calling off of the public sector strike. Mr Maseko said a decision on whether to go ahead with the government’s final offer would be taken after receiving a formal response from labour which met last night.

TAXtalk: www.taxtalk.co.za

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