Medium Term Budget Policy Kevin Lings

October 2008

SA GDP growth (government estimate)

-1.2

0.0

2.1

4.2

2.4

-0.3-1.0

-2.1

1.2

3.2 3.1

4.3

2.7

0.5

2.4

4.2

2.7

3.73.1

4.9 5.05.4 5.1

3.73.0

4.0 4.3

-3

-2

-1

0

1

2

3

4

5

6

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

% (MTBPS October 2008)

-2.3

-7.4-5.3

-0.6

8.310.7

9.0

5.7 4.8

-7.6

4.3 3.5 3.7

9.1 8.9 8.9

13.814.8

12.6

8.7 8.8 9.3

-10

-7

-4

-1

2

5

8

11

14

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

%

Fixed Investment Growth (Govt estimate)

4 4.2

5.9

2.71.5 1.4 1.1 1.5 2.1

0

-1.7 -1.2 -1.5 -1.7-0.5 -0.1 0 -0.6

-3.2-4

-6.5-7.3 -7.6 -7.8

-8.9 -8.8

-1.1

-10-9-8-7-6-5-4-3-2-101234567

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

% of GDP

Current account (Government estimate)

16.1

19.5

17.2

14.114.9 15.6

17.416.6

11.7

9.88

6.6

8.77.1 6.9

7.76.6

9.3

6.8

4.3 3.9

6.5

11.6

6.25.3 4.74.6

0

2

4

6

8

10

12

14

16

18

20

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

%

Inflation (CPIX and CPI from 2009) – Government estimate

REVENUETax revenueOther receiptsSACUEXPENDITUREInterestOther currentContingencyDEFICIT/SURPLUS

544.6556.6

11.1-23.1533.9

52.9478.0

3.010.7

559.8572.9

11.6-24.7541.5

52.9488.6

0.018.4

626.5642.3

11.3-27.1635.5

53.9581.5

0.0-9.0

Rbn Rbn RbnInitial Budget Revised Expected

2007/2008 2008/2009

MTBPS 2008/09 – October 2008

National deficit/surplusExtraordinary receiptsExtraordinary transfersNet borrowing requirement

Budget2007/2008 2008/09

18.301.80

-0.8019.30

-8.907.20

-4.90-6.60

Budget

10.731.250.40

11.58

Outcome

Financing the National Budget – MTBPS October 2008

10

15

20

25

30

35

40

45

50

55

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

%

Domestic debt

Foreign debt

Government debt as % of GDP

The most pressing priorities that Cabinet has approved

1. Improving the quality of education and skills development.

2. Improving the provision of healthcare.

3. Investing in the criminal justice sector to reduce the levels of crime and to enhance citizen safety.

4. Expanding investment in the built environment.

5. Decreasing rural poverty.

Inflation target unchanged

1. Mortgage interest rates as a measure of housing costs in headline CPI will be replaced with a measure of owner’s equivalent rent in 2009.

2. Replacement of mortgage interest rates with owner’s equivalent rent is in line with international best practice.

3. Headline CPI (CPI for all urban areas) will replace CPIX inflation for metropolitan and other urban areas as the official targeted measure of inflation when the changes are implemented in February next year.

4. The Minister of Finance and the Governor of the Reserve Bank have agreed that the target band for headline CPI will remain unchanged at 3-6 per cent.

5. It is expected that the reweighted and rebased CPI will indicate a somewhat lower rate of inflation in 2008 than the present index, partly due to lower expenditure weights for food and petrol.