This year’s Budget must showcase the country’s fiscal credibility, investment bank and financial services company Citi Research head and chief economist Gina Schoeman said during the company’s pre-Budget media roundtable on February 16.

She indicated that fiscal credibility depends on maintaining the same fiscal strategy or plan as before, which entails holding the line on wage bill reductions and maintaining, or even improving on, the debt stabilisation plan for 2023.

While revenue collection has contracted, it has been less than what the National Treasury had expected, noted Schoeman.

Therefore, she said, there was less revenue loss than initially estimated and the higher-than-anticipated revenue should be used credibly.

One possible option for that revenue overrun to be spent on was minimising additional expenditure, such as the vaccine roll-out and grant extensions, suggested Schoeman.

In this regard, she said the country was developing an appreciation for fiscal multipliers, with more tolerance shown for spending on the vaccine as well as social welfare.

Schoeman said that the way the revenue overrun was used would say a lot about the country’s fiscal strategy, and how mindful it was to the work being done on fiscal multipliers.

Schoeman said the higher-than-expected revenue collection was indicative of the country’s very narrow tax base, and that the higher income individuals recovered quicker than expected from the impacts of the pandemic.

However, she noted that there was still considerable expenditure pressure from the lower income space, both in terms of lower income households and small businesses who did not add as much to the income tax base.

Schoeman highlighted that the country’s path to economic recovery was not clear cut, with many unknowns. Some factors include how the country will handle a possible third wave of infections, as well as the vaccine roll-out.

Schoeman also noted that the political undertones to economic recovery must not be forgotten, with a local government election coming up this year.