The impact of the recession on non-interest spending

A central goal of the National Treasury is to make sure that non-interest spending remains higher than total expenditure. The intention is to direct more funds away from payment of debt. The recession has however placed a significant strain on the tax revenue. The chart below shows that between 2007 and 2009 government managed to ensure that non-interest spending grew faster than total expenditure. In other words, as a country we were able to grow spending on service delivery quicker than debt service costs. Since 2010 the picture has changed, with total expenditure (which includes debt service costs) growing more quickly. The intention of the National Treasury is clear in the forward estimates. It aims to close the gap between non-interest spending and total expenditure. This is important as it protects spending on service delivery.
[easychart type=”line” height=”300″ width=”350″ title=”% change in total consolidated expenditure and non-interest spending” groupnames=”Total consolidated expenditure, Non-Interest Spending” valuenames=”2007/08,   2008/09,   2009/10,   2010/11,   2011/12,   2012/13,   2013/14″ group1values=”15.2,   17.5,   17.5,   8.4,   9.8,   8.9,   8.8″ group2values=”16.9,   19,   18.7,   7.7,   9.3,   8,   8.2″ ]
(Data Budget Review, Authors Calculations)
In the context of a decline in revenue – even though there has been an increase when viewed against the 2010 estimates – government has increased the deficit. This is consistent with the counter cyclical strategy being followed by government. However, the challenge of protecting non-interest spending growth is vital to delivering services and enhancing opportunities, especially for the poor.

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