South Africa posted a record monthly budget deficit of 57.5 billion rand ($6.8 billion) in July as state expenditure surged, the National Treasury said.
Spending climbed by 12 billion rand to 97.5 billion rand last month from a year earlier, the Pretoria-based Treasury said in a statement on its website today. Revenue fell 3 percent to 39.9 billion rand in the same period.
“The deficit number is a disappointment,” Leon Myburgh, sub-Saharan Africa strategist at Citigroup Inc. in Johannesburg, said in an e-mailed response to queries. “Revenues were soft while expenditure accelerated. The outcome was quite a bit worse than what the full-year budget implies it should have been.”
Finance Minister Pravin Gordhan has pledged to reduce the fiscal shortfall to 3 percent of gross domestic product by the year through March 2015 from 4.6 percent this year. Standard & Poor’s, Moody’s Investors Service and Fitch Ratings have cut their outlook on South African credit rating since November, warning that the government may miss its deficit targets.
The budget deficit for the first four months of the fiscal year widened to 87 billion rand from 81.3 billion rand in the same period a year ago, the Treasury said.
Government revenues have come under pressure as a debt crisis in Europe cuts export demand, restricting growth in Africa’s biggest economy. Gordhan said on Aug. 16 the government will probably lower its growth forecasts in coming months. In February, he predicted the economy will expand 2.7 percent this year.
“The previous three months had seen very good outcomes,” Myburgh said. “The July number erases much of the positive outcomes of the previous months, but if this is a one-month anomaly then the full-year target is not yet at risk.”