South Africa’s Medium Term Budget Policy Statement (MTBPS) will take place next week and while there are certain expectations regarding government’s spending budgets, it helps to understand how these allocations are shaped.
This is where the Medium Term Expenditure Framework (MTEF) –a three-year planning and budgeting framework that sets out the government's spending priorities, comes into play.
While it may seem like some technical policy or document that ordinary South Africans don’t need to understand or pay attention to, the MTEF, like similar frameworks in other countries, is a crucial aspect of public financial management.
Here are some reasons why it's important for people to understand:
– Transparency and accountability
- Government spending: The MTEF outlines how the government plans to allocate its resources over a three-year medium-term horizon. Understanding this helps citizens and other stakeholders know where their tax money is being spent.
- Budget allocation: It provides insights into budget allocations across different sectors such as healthcare, education, and infrastructure. This transparency ensures that the government is accountable for its spending decisions.
– Economic planning and stability
- Economic impact: The MTEF reflects the government's economic policies and priorities. Understanding these policies can help individuals and businesses anticipate changes and plan their economic activities accordingly.
- Investment decisions: Investors often look at government spending patterns to gauge economic stability. MTEF data can influence investment decisions, impacting the overall economic growth of the country.
– Social development
- Social programs: The MTEF shows how much funding is allocated to social development programs. Understanding these allocations helps communities and NGOs anticipate resources for social welfare programs, healthcare, education, and poverty alleviation.
– Policy advocacy
- Advocacy efforts: NGOs and advocacy groups use MTEF data to advocate for specific policies or increased funding for certain sectors. Understanding this framework helps these groups make informed and evidence-based arguments.
– Fiscal responsibility
- Debt management: The MTEF often includes information about how the government plans to manage its debt. Understanding this is vital for citizens as it directly impacts the country’s fiscal health, which, in turn, affects taxation and public services.
– Government priorities
- Policy priorities: The MTEF reflects the government's strategic priorities. Understanding these priorities provides insights into the national agenda, helping people engage in discussions about the direction the country is taking.
– Education and awareness
- Educational purposes: Understanding the MTEF is essential for students studying economics, public administration, and related fields. It provides a real-world context for learning about economic planning and government expenditure.
Ultimately, South Africa's MTEF is important for citizens, businesses, NGOs, and policymakers as it fosters transparency, facilitates informed decision-making, and encourages active civic participation in the country's economic and social development.
The relationship between the MTBPS and the MTEF
The MTEF is important because it provides a transparent and accountable framework for government spending, and also helps to ensure that spending is aligned with the government's policy priorities and is sustainable over the medium term.
The MTBPS, on the other hand, plays a key role in the MTEF as it sets out the government's fiscal policy objectives and provides an update on the medium-term spending framework. The MTBPS also provides an opportunity for stakeholders to provide input into the budget process.
While the MTEF sets the broad parameters for the government's spending priorities, the MTBPS provides the details of how those priorities will be funded. The MTBPS also provides an opportunity for the government to make adjustments to the MTEF in light of changing economic conditions.
The MTEF and the MTBPS are two complementary instruments that help to ensure that government spending is aligned with the country's policy priorities and that it is sustainable over the medium term.
Here are some specific examples of how the MTEF impacts the medium-term budget:
- Planning and allocation: The MTEF provides a framework for government departments to plan their budgets over a three-year period. It sets out the expected revenue and broad expenditure priorities, allowing each department to allocate funds according to these priorities.
- Expenditure ceilings: The MTEF sets expenditure ceilings for different sectors and departments. These ceilings are limits on spending, helping the government to maintain fiscal discipline and allocate resources efficiently. Departments cannot exceed their allocated ceilings without approval, ensuring a degree of financial control.
- Policy alignment: The MTEF aligns government priorities with financial allocations. It ensures that budgetary allocations are in line with the government's policies and plans, promoting consistency and coherence in public spending.
- Budgetary predictability: The MTEF provides a degree of predictability for government departments regarding future funding. This predictability is essential for effective long-term planning, especially for programs and projects that require multi-year funding commitments.
- Economic stability: By providing a clear medium-term fiscal framework, the MTEF contributes to economic stability. It reassures investors, businesses, and the public about the government's fiscal intentions, which can positively influence economic confidence and growth.
- Transparency and accountability: The MTEF process enhances transparency and accountability in public financial management. By clearly outlining the government's budgetary plans and priorities over a medium-term horizon, it allows for better scrutiny and understanding of how public funds will be utilised.
It's important to note that the impact of the MTEF on the MTBPS will depend on various factors, including economic conditions, revenue collection, and government priorities. Both the MTEF and the MTBPS are important tools for ensuring that government spending is transparent, accountable, and sustainable.
Main highlights in the 2024 MTEF
1. Fiscal consolidation
The MTEF aims to reduce the budget deficit and stabilise the debt-to-GDP ratio over the medium term. This will be achieved through a combination of revenue and expenditure measures.
2. Investment in infrastructure
The MTEF prioritises investment in infrastructure, such as energy, transport, and water and sanitation. This is essential for supporting economic growth and creating jobs.
3. Social protection
The MTEF also prioritises social protection programs, such as grants and subsidies, to help the poor and vulnerable. This is important for reducing poverty and inequality.
Other key highlights of the 2024 MTEF include:
- Support for small businesses: The MTEF allocates resources to support small businesses, which are the backbone of the South African economy.
- Education and skills: The MTEF invests in education and skills development to ensure that South Africans have the skills they need to succeed in the economy.
- Healthcare: The MTEF also invests in healthcare to improve the quality of life for all South Africans.
The MTBPS will take place on Wednesday, November 1.
IOL Business