South Africa will probably meet or beat its budget deficit target of 3.9 percent of gross domestic product in the fiscal year that ended on Tuesday after collecting more tax than anticipated.
The South African Revenue Service collected 986.4 billion rand ($81.6 billion) of taxes in the year through March 31, Commissioner Tom Moyane told reporters the capital, Pretoria, on Wednesday. This was 7.4 billion rand more than the revised tax revenue estimate announced in the February budget. The final budget gap will only be known once data on government spending is finalized.
“Revenue growth this year just ended remained resilient,” Finance Minister Nhlanhla Nene said. Tax revenue was 9.6 percent higher than the previous year, he said.
Nene announced the first income tax increases in 20 years in his February budget to help plug a revenue shortfall and imposed limits on state spending to contain debt and ward off further credit-rating downgrades. Standard & Poor’s rates South African debt one level above junk and below the assessments of Fitch Ratings Ltd. and Moody’s Investors Service.
The government plans to narrow the budget deficit to 2.5 percent of GDP in the fiscal year through March 2018 from an estimated 3.9 percent last year.
“We can’t just use this to extrapolate the deficit for the financial year that starts today and the future ones,” Treasury Director General Lungisa Fuzile said. “In the event that anything threatens to derail our plan to achieve those fiscal targets, we can do a number of things to make sure that we achieve those targets.”
Africa’s second-largest economy expanded 1.5 percent last year, the slowest pace since a recession in 2009, and will probably grow 2 percent this year, according to the National Treasury.
“Revenue collection is a function of how the economy functions and performs,” Moyane said. “When sentiment is negative and GDP growth is in decline, the challenge is much more difficult.”