Minister of Finance, Peggy Serame, said it is important to enact new legislation, amend existing laws, and implement policies aimed at fostering entrepreneurial capacity, enhancing productivity, fostering export-led growth, generating quality employment, and diversifying the economy.
The minister was speaking during a Budget Pitso consultation with Members of Parliament on Wednesday. The meeting discussed the Budget Strategy Paper (BSP).
The BSP provides an outlook of the macroeconomic environment at the global, regional, and domestic level as well as outlines key strategic priorities needed to accelerate the development agenda for the 2024/2025 financial year. Serame asserted the need to facilitate strategic reforms that put citizen economic inclusion at the centre of economic development initiatives with the desire to achieve Prosperity for all.
She said the Strategy Paper outlines the commitment of the government towards achieving a high-income status by 2036, coupled with accelerated job creation, especially youth employment, fiscal sustainability, economic diversification as well as improved livelihoods.
“In light of these, the 2024/2025 budget will support programmes and initiatives geared towards promoting the growth of non-mining industries,” said Minister Serame.
“At a strategic level, the development of inclusive policies and programmes will continue to be guided by the eight priorities as outlined in the second Transitional National Development Plan (TNDP).”
These priorities include; Export-Led Growth and Attracting Foreign Direct Investment, Supporting the private sector through Business Environment Reforms and Value-Chain Development, Innovation and Digital Transformation, Financial Sector Reform, Infrastructure Development and Spatial Planning, Green Transition, Fiscal Sustainability, Education and Human Capital Development.
It is hoped that the identified priorities in the BSP will reshape and rebalance the economy to achieve higher and more equitable growth.
“The priorities are further expected to support the positive economic growth trajectory experienced to date and expand the country’s productive capacity, accelerate economic transformation, and build resilience of the economy against adverse external shocks,” she said.
The 2024/2025 budget will mark the end of the second TNDP which will pave the way for the implementation of the National Development Plan 12 (NDP 12).
As such, Serame said the 2024/2025 financial year is expected to play a pivotal role in guiding the design of prudent macroeconomic policies needed to ensure the attainment of a stable macroeconomic environment during NDP 12.
According to Serame, the world economic prospects continue to weaken on the back of heightened macro-financial uncertainty coupled with the lack of clarity on the ongoing geopolitical tensions.
Due to these uncertainties, she said the world economy is estimated to slow down to 3.0 percent in 2023 from 3.5 percent in 2022.
“Slow global economic activity is expected to affect the domestic economy through the trade channel, particularly diamond sales, as global demand for rough diamonds weakens,” the minister said.
“In light of these growth prospects, difficult policy trade-offs are necessary to cope with adversity and attain macroeconomic stability while also supporting economic recovery.”
Accordingly, the minister said this underscores the importance of advancing structural reforms to promote economic diversification and private sector development which will boost growth and employment potential and reduce inequality.
Further, she said more efforts are needed to continue implementing fiscal consolidation measures which is critical to preserve fiscal sustainability and supporting comprehensive State Owned Enterprises (SOEs) reforms as well as improving the business environment.
Moreover, Serame said the government’s policy thrust will continue to be anchored on maintaining a sustainable fiscal position to support structural reforms required to ensure inflation and exchange rate stability whilst enabling the government to finance public services in an affordable and sustainable budget framework.
According to the BSP, for the 2024/25 financial year, total revenue and grants are projected at P83.7 billion, while total expenditure and net lending is expected to record Total revenue and grants are projected at P93.2 billion in FY2025/26, while expenditure is estimated at P90.9 billion. The fiscal balance is projected to slightly narrow to a deficit of P5.1 billion or -1.6 percent of GDP in FY2024/25 before reaching a surplus of P2.3 billion (equivalent to 0.7 percent of GDP) in FY2025/26.
The non-resource primary balance for FY2024/25 is however projected at P30.9 billion, which is equivalent to -10.0 percent of GDP. The BSP forecasts the Gross Financing Requirement for financial year 2023/24 and 2024/25 to be P10.8 billion (budget deficit).
It is anticipated that this shortfall will be financed through a combination of three financing options: net issuance of domestic government securities, in the form of bonds and Treasury Bills, which is anticipated to provide P5.9 billion; net external financing, from official multilateral and bilateral lenders, which is projected at P3.5 billion, should all the envisaged budget support loans be disbursed in the year; and P1.6 billion expected to be drawn from the Government Investment Account (GIA) over these two years.