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Gordhan to present mid-term budget

by BuaNews Online
on 25 Oct 2010
BuaNews Online
BuaNews Online

Finance Minister Pravin Gordhan will this week present the Medium Term Budget Policy Statement (MTBPS), amidst issues such as the strength of the rand.

"The important thing that needs to be addressed is how to get higher growth. It will be interesting to see what comes out," senior economist at Investment Solutions Chris Hart said on Monday.

Minister Gordhan earlier said the actual growth of the economy for 2010 could be higher than the forecast in the budget.

Other issues of importance include the strength of the rand, which rose to one of its highest levels last week at R6.76 to the Dollar. Government finances were likely to have improved, with tax returns going back to the South African Revenue Services quicker.

Hart said attention needs to be paid to exchange controls in order to boost the economy. "We should have a look at the cost benefits of a regulatory structure. We also really open the space for small business to be brought to the party," he said, adding that this would help in reducing unemployment.

Nedbank economist Isaac Matshego agreed with Hart, saying he expects an announcement in relation to exchange controls.

Looking at the first five months of the financial year, there has been quite strong revenue growth. "In terms of the deficit, this could be revised downwards to about 5.9 percent of GDP from February's 6.5 percent, "said Matshego.

On the issue of high wage settlements, Hart said this needs to be discussed around productivity.

The three-week public service strike saw a settlement of 7.5 percent and a housing allowance of R800. Initially, unions demanded an 11 percent wage increase and a R1 650 monthly housing allowance. This was later revised to an 8.6 percent salary increase and a R1 000 housing allowance.

Standard Bank senior economist Dr Johan Botha said: "I don't think [there will be] major decisions but we can expect to see that the deficit will come down based on solid revenue flows to date this year. There might also be removal of exchange restrictions that remain."

He added that the budget would reflect the state of the local economy in relation to government policy.

Minister Gordhan will present the MTBPS on Wednesday. - BuaNews


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