By Phephile Motau
Without any grant from development partners, the Minister of Finance Neal Rijkenberg has about E25 billion to finance the 2023/24 national budget, the Eswatini Financial Times has reliably established.
This amount comprises the record-high E11 billion SACU receipts announced by Rijkenberg on Monday and the over E12 billion that would be raised from the collection of domestic taxes by the Eswatini Revenue Service (ERS).
When delivering the Mid-Term Budget Review Report 2022/23, the minister projected that total domestic tax collection was expected to increase by an average of 6.0 per cent in the medium term, amounting to E12.98 billion in 2023/24.
This would bring the total revenue excluding grants to E24.73 billion. At the time of the Mid-Term Budget Review, the minister had estimated that SACU receipts would be at E9.96 billion.
The available revenue without grants is the highest since 2019 and it is also surpassing the total budgets of the past four years (2019 – 2022). The budget for 2019 was E21.83 billion, for 2020 it was E24.08 billion, E24.04 billion for 2021, and E23.2 billion for 2022.
With the E24.73 billion revenue without grants, this suggests Rijkenberg could have easily fully financed the budgets for 2019, 2020, 2021, and 2022 without having to borrow money from the domestic and international financial markets.
Having this amount of revenue means the finance minister will deliver a more realistic budget because he knows where the money will come from unlike in the previous budgets where he announced budgets with huge deficits.
The huge deficits meant the government had to borrow more money to honour its budgetary obligations. Notably, the fiscal deficit had been fluctuating but on the high side since 2019 as it was above 4.0 per cent of the Gross Domestic Product (GDP).
In 2019, the fiscal deficit (money that the government had to borrow to fill the shortfall) was E2.98 billion, E2.88 billion in 2020, E4.6 billion for 2021, and E3.8 billion. This indicates that the government has borrowed over E14.34 billion to finance budgetary shortfalls in the last four years.
With a projected revenue of about E25 billion, economists have observed that the country is edging closer to the goal of having a fiscal deficit of 1.5 per cent of the country’s gross domestic product (GDP).
When asked about the possibility that the revenue would be higher, the minister said reaching the goal of a 1.5 per cent fiscal deficit of the country’s GDP, would mean that the country’s debt to GDP goes down.
“It will mean that we are not overburdening future generations with debt, and this will enable us to spend more of our budget on people’s needs rather than paying interest, and should lure investors to invest in a country that is not going bankrupt,” Rijkenberg said.
This could also have not come at a better time as the minister recently acknowledged that the country’s next budget would need additional funding due to the elections and payments of gratuity for politicians as their terms come to an end.
In his mid-term budget, the minister said total revenue was expected to grow both on the domestic collection and SACU receipts in the medium term.
“In 2023/24, revenue and grants are expected to amount to E23.85 billion. Total revenue and grants are expected to grow by around 24 per cent in 2023/24 when compared to 2022/23. The growth projection is attributed to higher anticipated domestic revenue collection, specifically on items such as income tax and taxes on goods and services, and a rebound in SACU receipts,” the minister said.
The minister attributed the projected increase in domestic revenue collection in the medium term to several proposed revenue measures forming part of the Fiscal Adjustment Plan (FAP), efficiency gains, and favourable economic growth.
Rijkenberg said the government was working tirelessly to ensure that revenue enhancement reforms were put into place. The plan constitutes policy changes that include the introduction of an automated system by ERS which was expected to have a considerable positive impact on the VAT collection.
In a recent statement, the minister announced that SACU receipts for Eswatini would increase by 102 per cent in 2023/24 from E5.8 billion in 2022/23 to E11.75 billion.
He said this was the highest share that the country has ever received from the regional bloc. He said factors that have contributed included a higher than projected outturn of the 2021/22 Common Revenue Pool (CRP) and the surplus emanating from that will be paid together with the 2023/24 revenue share and a 25 per cent increase in the projected size of the CRP for 2023/24 compared to 2022/23.
Rijkenberg also said an increase in Eswatini’s share of total intra-SACU imports from 9.6 per cent in the revenue sharing framework for 2022/23 to 10.8 per cent in 2023/24 which means that the measures that the Ministry has been implementing to enhance intra-SACU imports have started paying off.
In his statement when announcing the growth of the SACU receipts, minister Rijkenberg said the government will be setting up a SACU stabilisation fund that would help bring more stability to the volatility the country normally had in the SACU receipts. He said the stabilisation fund still needed to be approved by Cabinet and Parliament.
“We are hoping to table the regulations for the fund together with the budget that will be presented soon. The SACU stabilisation fund will be put in place so that when we have better years like the year ahead, we will take the funds from that year to cushion in years when the SACU receipts are low,” he said.
Rijkenberg said they were still planning and hoping that this would be finalised at Cabinet and Parliament.
“We are hoping to put about E1.5 billion into the SACU stabilisation fund this coming year and this should give us a lot more stability as an economy going forward.”
He said the advantage of this was that it was resetting Eswatini’s normal, so going forward the country should continue to receive a higher percentage from the SACU revenue pool.