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Understanding Finance Jargon

You may recently have heard people in the news mentioning the Medium-Term Budget Policy Statement.

So, what exactly is the Medium-Term Budget Policy Statement and why should you care?

The Medium-Term Budget Policy Statement

Each year the government plans ahead for what they think they will get in tax income and how they will spend it.

It is pretty much what all of us do (officially or unofficially) in our own financial lives. We look over our salary and compare that to the things we both want and need (prioritising the needs).

The government then shares that plan each year around February.

After 6 months they go back and compare what they thought was going to happen with what has actually happened over the first half of their financial year.

This allows them to see if they are brining in more or less money than thought and see if there have been any unusual events that have changed their plans.

For example, in the past their have been world events that threw a spanner in the works such as the Russian invasion of Ukraine and its effects on global wheat and oil prices. When that happened government had to change plans somewhat to adjust.

This year the Medium-Term Budget Policy Statement will be made on the 1st of November to inform the public of how things are going and if there will be a shift in spending plans.

Cut Back Or Borrow More

With the tough economic situation made tougher by ongoing loadshedding and a slowly crumbling rail and ports system, the country is experiencing hard times. 

Less business means less taxes paid, which means Government will have to make a difficult choice (but it should be a simple one).

Spend less (unpopular leading up to elections next year) or borrow more (and thereby kill future government bond  investment as the debt burden grows too large).

 

Debtfree Magazine will report on the Medium-Term Budget Policy Statement once it is available.