South Africa expects revenue to improve as confidence and investment in the economy grows after a recession that pushed the budget into deficit, Finance Minister Pravin Gordhan said.
The budget in Africa’s largest economy slid into a deficit of nearly 7 percent in the 2008/09 financial year after a few years of small surpluses as it increased spending to counter the effects of its first recession in nearly two decades.
Last month Gordhan estimated a budget shortfall of 5.3 percent of gross domestic product (GDP) in 2011/12, wider than the 4.6 percent predicted last October. On Tuesday he said this was unavoidable after the recession slashed revenue, Reuters reports.
“Yes, we are 0.5 or 0.7 percent out over the next three years in terms of what we thought the deficit would be but that’s not because of irresponsible behaviour but because revenue is not coming through as we predicted,” Gordhan told parliament.
“(The deficit) was forced upon us by factors that are extraneous to us. What we are now doing is working our way out of it. Confidence in our economy is growing, investment in our economy will grow, and the chances of the revenue sector improving are even better.”
South Africa plans to issue 135 billion rand of government bonds in the domestic debt market this year to help cover the deficit and last week launched a US$750 million 30-year international bond.
But Gordhan told the Reuters Africa Investment Summit on Monday South Africa would exercise prudence, taking care not to borrow too much internationally.