Parliamentary Budget Office Flags Fiscal Risks and Growth Constraints in 2025 Budget Review
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The Parliamentary Budget Office (PBO) has released its 2025 Budget Analysis, providing an independent assessment of South Africa’s fiscal outlook, revenue strategies, and expenditure priorities. The report highlights persistent economic challenges and structural constraints that may hinder the government’s fiscal consolidation efforts.
Economic Outlook and Fiscal Risks
The PBO projects modest GDP growth of 1.4% for 2025, with a medium-term average of 1.6%. These projections reflect subdued domestic investment and sluggish global trade. Public debt is expected to rise to R6.8 trillion by 2027/28, raising concerns about fiscal sustainability.
Revenue Measures and Tax Policy
The analysis notes a downward revision of R61.9 billion in gross tax revenue projections over the Medium-Term Expenditure Framework (MTEF). To address this shortfall, the government plans to implement tax measures aimed at generating R18 billion in 2025/26 and an additional R20 billion in 2026/27. These measures include adjustments to fuel levies, increased excise duties on alcohol and tobacco, and limited personal income tax relief.
Expenditure Priorities and Social Spending
The PBO observes that over 60% of non-interest spending is allocated to the social wage, encompassing health, education, and social grants. An additional R33.7 billion is earmarked for infrastructure investments over the medium term. However, the report cautions that the sustainability of social spending is at risk due to fiscal constraints.
Public Sector Reforms and State-Owned Entities
The report highlights ongoing public sector reforms, including early retirement incentives and efforts to identify and eliminate ghost employees. Education and health sectors are set to receive an additional R30.4 billion combined over the MTEF. Regarding state-owned entities, the PBO notes the absence of new bailouts, with Eskom receiving a revised debt relief package of R40 billion in 2025/26 and R10 billion in 2028/29.
Conclusion
The PBO’s analysis underscores the delicate balance the government must maintain between fiscal consolidation and socio-economic development. The report serves as a critical resource for Parliament in its oversight role, providing insights into the challenges and trade-offs inherent in the 2025 budget.
