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Nothing pro-poor about unsustainable fiscal policy – Nene
Cape Town – Hard adjustments were made in the national budget to protect the integrity of public finances, Finance Minister Nhlanhla Nene said in his first address to the National Assembly since his reappointment to Cabinet.
“Bold choices were taken to place the country on a sustainable trajectory,” he said on Wednesday.
The National Assembly voted in favour of adopting the fiscal framework with 191 votes for and 81 against. There were no abstentions.
Nene told MPs that difficult trade-offs were necessary to put public finances on a sustainable path. “Stable finances are fundamental building blocks of democracy, development or growth. There is therefore nothing pro-poor or developmental about unsustainable fiscal policy.”
While government has been facing difficult budget decisions given low economic growth, Nene said the revised GDP growth figure of 1.3% for 2017, announced by StatsSA earlier in the week, signalled a stronger growth outlook.
The new finance minister acknowledged concerns around the budget raised by MPs, such as the country's growing debt servicing costs and the burden of the one percentage point hike in VAT rates on poorer households.
Treasury was open to further consultation on VAT.
But he said that alternatives and recommendations could not be implemented easily, or would not be able to raise enough revenue. “We will be taking recommendations into account and see which to accommodate at the appropriate time as we engage,” he said.
Nene said that the VAT increase would impact all households, not just those of the poor.
He confirmed previous statements by Treasury that the list of zero-rated items would be expanded. “Expansion is indeed on the cards,” he said.
Based on concerns raised by MPs, Nene said it was clear that it would take a collective effort to close the revenue gap. “We must deal with corruption so spending demonstrates to the poor that we collect revenue from them that serves them as well.”