Home | Business | GOVT’S E3BN FINANCING GAP IN FY 2021/22

GOVT’S E3BN FINANCING GAP IN FY 2021/22

Font size: Decrease font Enlarge font

MBABANE - The financing gap in the next financial year (2021/22) is estimated at an alarming E3 billion.

This is about 4.2 per cent of gross domestic product (GDP). A team from the Ministry of Finance led by Minister Neal Rijkenberg told senators during a presentation on medium-term fiscal framework (MTFF) that without additional financing, arrears would accumulate by the same magnitude.  The event was held at the Happy Valley Hotel Conference Room on Thursday.

Levels

Despite fiscal adjustment, the ministry shared that financing gap would amount to the unprecedented amount and was persisting over the medium term at concerning levels. 

“The persistent financing gap has contributed to the accumulation of domestic arrears, projected to reach E10.3 billion in 2023/24, in absence of additional financing,” shared the ministry.

A gap occurs when no provision has been made for financing that is required. 

An expert said funding gaps could be covered by investment from venture capital or through debt offerings and bank loans.

Increased expenditures coupled with shortfall in revenue collection and limited scope for financing in the debt market has resulted in a financing gap over several years.

 Developments

The latest developments come at a time when public debt in 2020/21 is estimated to reach an unwanted 43 per cent of GDP. It is projected to increase up to 48 per cent of GDP in 2023/24.  

The Central Bank of Eswatini had reported that total  debt  stock  for  the  country  stood  at  E26.2 billion  as  at the end  of  September  2020,  an equivalent of 41.5 per cent to GDP.

“Despite fiscal adjustment measures, the deficit is expected to remain high caused by low anticipated SACU receipts, deteriorating the prospect of bringing government’s fiscal accounts onto a sustainable path,” reported the ministry.

Meanwhile, during the event the ministry further reported that this year, the MTFF had already incorporated a number of policies that are aligned with government’s fiscal adjustment plan. 

Execution

“The MTFF assumes execution of a Domestically financed capital budget of 65 per cent.  Assuming execution rate of 100 per cent generates a fiscal deficit of 9.3 per cent of GDP and increase in the financing gap of E739 million. 

“In 2020/21 the estimated financing surplus of E545 million can be utilised to clear arrears,” reported the ministry.

With successful implementation of the Fiscal Adjustment Plan, the fiscal deficit is projected to decrease towards the end of the adjustment time period. 

Meanwhile, as reported in the last edition; there are policy measures and efficiency gains introducing a turnover based alternative minimum tax at 0.5 per cent of turnover.

Other plans include expanding tax base to include items currently exempted such as diary products and eggs.

Comments (0 posted):

Post your comment comment

Please enter the code you see in the image: