Insight: New era for GNU Budget Process: a test of democratic maturity
Finance Minister Enoch Godongwana wore a red-striped tie at the media briefing ahead of his fourth Medium-Term Budget Policy Statement (MTBPS) speech.
Several members of the media wanted to know how the budgeting process would work now that the Government of National Unity (GNU) contained ten parties, each with its own agenda.
He said the formation of the GNU in June demonstrated the resilience and maturity of South Africa’s constitutional democracy. Deputy Finance Minister Ashor Sarupen from the previous opposition party, the Democratic Alliance, said he had been involved in all the meetings that formulated the MTBPS and was happy to say that much of what he suggested a year ago has been incorporated in Treasury thinking.
Godongwana stressed that the GNU partners were singing from the same page when it came to fiscal consolidation, although there were differences as to the pace of consolidation.
He also said that reducing the inflation target to 3% from the current 4.5% was being considered, but issues such as inflation targeting were subject to continuous evaluation.
South African Reserve Bank governor Lesetja Kganyago, in a recent speech, said he wanted South Africa to emulate Chile and lower the inflation target to enable lower interest rates.
“In 2000, both Chile and South Africa adopted inflation targets. Chile went for 3% and we went for a range of 3−6%. Since then, our inflation has been higher than Chile’s by 1.8 percentage points, on average. We have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates. Executed effectively, a lower target could be achieved at little cost – just as we moved to 4.5% at little cost.”
The latest consumer inflation rate was 3.8% year-on-year in September, but the Treasury has forecast an average annual rate of 4.4% for next year.
BUSINESS REPORT