Money manager ex from sacu4/28/2023 South African fiscal policy has strong spillover effects on BLNS through the sharing of receipts in the SACU pool. As a result, the remainder of this chapter will focus exclusively on BLNS. Given that customs and excise revenues are a small fraction of South Africa’s revenue collections, a reduction in SACU transfers would not have a very large impact on South African fiscal policy. The policy response was to provide fiscal stimulus to the extent that fiscal space was available. South Africa has been primarily affected by a significant contraction in activity, resulting from lower global economic growth. The fiscal policy implications for South Africa differ from those for BLNS. Hence, further fiscal adjustment is needed to reduce the dependence on SACU transfers and restore fiscal buffers. Botswana experienced an improvement of about 6 percent of GDP over the same period, largely because of cuts in capital spending.Īlthough SACU transfers to BLNS have increased significantly in the fiscal year that started on Ap(FY2012/13), the risk of lower SACU revenue over the medium term remains high, partly reflecting a likely slowdown of the global economy and trade liberalization. from 2008/09 to 2011/12), with a worsening of primary balances ranging from 5 percent to about 20 percent of GDP. However, despite these measures, primary fiscal balances deteriorated for all countries (except Botswana) during the crisis (i.e. In parallel, expenditures were restrained in many countries, with outright cuts in capital spending (Botswana), non-priority spending (Lesotho, Namibia, and Swaziland), wage freezes (Botswana and Swaziland), and further plans to reduce the wage bill (Lesotho and Swaziland). Revenue collection has been improved with the introduction of the value added tax (Swaziland), increased tax rates and duties (Botswana and Swaziland), and continued improvements in revenue administration. Thus, lower SACU revenues translate into higher fiscal deficits, which are difficult to reduce rapidly given the recurrent nature of many expenditure items.Īware of the risks, BLNS have already taken significant fiscal adjustment measures. The decline in fiscal balances underscored the need for fiscal consolidation and a new set of institutional reforms to encourage adherence to prudent fiscal policies and reduce the dependence on SACU transfers.īLNS relied on temporarily high SACU transfers to finance high levels of recurrent expenditure, notably on the wage bill ( Figure 4.1). Second, there were increased expenditures prior to the crisis. First was a considerable reduction in SACU transfers, which account for a large share of total revenue for Botswana, Lesotho, Namibia, and Swaziland (BLNS), 1 owing, in part, to the global crisis, which reduced the SACU revenue pool, but also to the procyclicality of the revenue-sharing formula, which aggravated the decline (see Chapter 3). This deterioration came from two sources. Following the onset of the global economic crisis in 2008, Southern African Customs Union (SACU) member countries experienced a significant growth slowdown and deterioration of their fiscal balances.
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