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Medium Term Expenditure Framework MTEF

Monetary policy entails short term stabilisingmeasures by the reserve bank such asregulating price fluctuations, balance ofpayments, international value of the randand employment in order to allow long termeconomic growth. It aims to affect moneysupply, credit extension by financialinstitut

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Medium Term Expenditure Framework MTEF

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    1. Medium Term Expenditure Framework (MTEF)

    2. Monetary policy entails short term stabilising measures by the reserve bank such as regulating price fluctuations, balance of payments, international value of the rand and employment in order to allow long term economic growth. It aims to affect money supply, credit extension by financial institutions and interest rates Monetary Policy

    3. Fiscal policy is a deliberate action by government to influence the economy by changing the levels of government expenditure and/or taxation The point to remember is that what the government gives it must first take away John S Coleman Fiscal Policy

    4. The MTEF involves a review of existing programmes and sub-programmes which may lead to a revision of the existing budget structure, aimed at a clear statement and measurement of outputs. Frameworks For Distribution And Spending THE MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF)

    5. The South African Macro Economy Where we have come from, where we are and what lies ahead

    6. Characteristics of the SA Economy a medium-sized, semi-industrial middle-income developing country; still strongly dependent on exports of a limited number of commodities situated in the worst-performing economic region of the world (ie, sub-Saharan Africa); characterised by a highly unequal distribution of personal income and wealth; experiencing pervasive poverty; weak social indicators relative to per capita income; low levels of human capital development; experiencing rapid population growth and rapid urbanisation; high concentration of economic power; and vulnerable to the vagaries of international market forces.

    7. Some Reasons for Economic Decline Between 1974 and 1994 inappropriate monetary, fiscal and exchange rate policy measures; over-reliance for too long on primary commodities; international isolation and the loss of competitive urgency; and the denial to the majority of the population of economic and social opportunities. The growth picture since 1994 - promising, yet inadequate

    8. Unemployment Statistics South Africa’s definition of unemployment to refers to those persons who are 15 years and older (but normally below the age of 65 years); are not currently employed; are available for employment; and have taken specific steps to find employment

    9. Forms of Unemployment Wide-ranging and complex Conventionally, frictional, seasonal, cyclical and structural Unemployable vs unemployed

    10. Employment Trend

    11. Employment intensity non-agricultural private sector (number of employees per R1m real GDP)

    12. Considerations for Employment As long as they are perceived to be more productive than labour, there will be a preference to use capital and technology as a production factor The state, which has traditionally been a major employer of people in South Africa, is unlikely/unable to employ more people in future Like elsewhere in the world, more and more jobs will be created in the small and informal business sectors of the economy, and no longer by large corporations Self-employment is going to become an increasingly important source of employment for hundreds of thousands of new work-seekers

    13. GEAR Improved macro-economic balance and fiscal discipline Reduce the budget deficit as percentage of GDP Restraining, then reversing the growth of the national debt Easing the interest burden on government debt Reduce net dissaving by the public sector Increased competitiveness and greater openness to the international flow of goods and services Further tariff reductions Deregulation of the capital account of the balance of payments Encouragement of foreign direct investment

    14. GEAR continued Greater market liberalisation Strengthen competitions policy Deregulate financial markets Privatise (some) state-owned enterprises Increase flexibility of labour markets Re-orient economic role of government towards creating growth-enhancing policy frameworks rather than extending direct state involvement

    15. Questions Determining Parametres What is the total budget available for public spending? Economic growth Inflation Debt targets Tax to GDP targets MEDIUM TERM FISCAL FRAMEWORK

    16. Questions Determining Parametres What are the delivery needs and what will they cost? National Provincial Local BUDGET PROPOSALS

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