Ex-Finance minister’s prediction comes to pass

Ex-Finance minister’s prediction comes to pass

For the first time government will benefit directly from a fuel levy proposed by the Minister of Finance, Neil Rijkenberg, if it’s approved by parliament. Government seeks to increase revenue due to the ailing fiscal position with which the country is faced. The proposal is that for every litre of fuel bought, E1.20 will be added to accrue to the government revenue pool. The fuel levy proposal is not a market movement as it may be seen, but due to the unprecedented economic crisis facing the country. Government coffers have run dry and efforts to refill them are being put in place. Preliminary estimates suggest a contraction of 0.4 percent in the country’s GDP for 2018
and the economic outlook remains subdued and Foreign Direct Investment has been on average negative for a number of years. Sincephetelo Motor Vehicle Accidents Fund (SMVAF) benefits a standard 35 cents per litreof fuel as levy.
Arrears have accumulated and the country continues to draw down on reserves. The economy has stagnated and government is failing to attract investment as the gap between the rich and poor continues to grow, said the minister during the presentation of his budget in the House of Assembly two weeks ago. Regional economic weakness, international trade tensions and the lingering impact of the global financial crisis have all contributed to
Eswatini’s present crisis, but so too have the structural inefficiencies and deficiencies in economic policy and governance. A key component of the crisis is government’s growing wage bill which in the last 10 years has grown
by 125 percent. In contrast, volatile SACU receipts have made government’s fiscal position untenable. In the medium term, SACU receipts are expected to decline due to South Africa’s worsening economic position. Resuscitating the economy will require government to stimulate GDP growth, boost local employment and generate higher, sustainable
export revenues for the foreseeable future and one of the priorities that need to be addressed is developing a fiscal consolidation plan and arrears funding strategy. Government seeks to enact new policies and pass the required legislation to de-regulate and open the economy for business, a move that will allow the private sector to take the lead, unlocking results such as accessing a renewable energy industry. The IMF’s January 2019 World Economic Outlook estimated that global growth reached 3.7 percent in 2018. The combined negative impact of trade tensions between the United States and China, as well as lower demand expectations in Europe, put downward pressure
on global growth forecasted to be 3.5 percent in 2019 and 3.6 percent in 2020. Growth in South Africa was expected to be just 0.7 percent in 2018 after the country experienced a technical recession in the first half of the year. The South African government responded with a stimulus package and other reforms to boost growth and support the
recovery of the economy. RSA’s growth was projected at 1 percent and 1.7 percent in 2019 and 2020, respectively.
Economists observed that this economy recovery exercise is a long term project and requires total commitment on all sectors, including the ordinary man in the street. The matter of increasing fuel is not a new one as ex-minister of finance Martin Gobizandla Dlamini once said it was imminent. He said this would be with effect from April 2019, further stating that government policy on user fees was basically to recoup the costs of providing the
goods or services. “Government is cautious that the increase in the user fees does not exclude sections of the
population from accessing some of the goods or services, especially those that are mandated by law such as birth certificates, identification numbers and passports,” said the ex-minister. A number of user fees had not been increased for over a long period, while the cost of providing these good services had continued to increase. All petroleum products consumed in the country are imported from refineries in Durban, South Africa. The ex-minister said, as government, they were planning to review those fees to ensure that government continued to provide the various goods or services, adding that the Ministry of Finance had been engaging different line ministries during the course of 2017/2018 financial year, encouraging them to investigate possibilities of revision, consistent with
government policy.

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