S.AFRICA EXPECTED TO UNVEIL EXPANSIONARY BUDGET
  South Africa is expected to unveil
  tomorrow an expansionary budget for the second consecutive year
  in a bid to boost the nation's flagging economic growth rate,
  economic analysts said.
      Faced with competing demands for increased military and
  police spending and the pressing need for more funds for black
  housing and education, Finance Minister Barend Du Plessis is
  expected to raise significantly the government's overall
  expenditure targets when he presents the budget to parliament,
  the analysts said.
      Analysts expect Du Plessis to provide for a rise in state
  spending at least equal to the 16 pct inflation rate for the
  financial year that started on April 1, while ignoring pleas
  from the private sector to stimulate growth by cutting taxes.
      "Fiscal policy has become gradually more expansionary, but
  simply raising government spending and increasing the budget
  deficit is an inflationary form of stimulation," said Rob Lee,
  chief economist at South African Mutual Life Assurance Co.
      South Africa this year is targeting inflation-adjusted
  growth in GDP of three pct against an increase last year of
  less than one pct.
      Growth in GDP over the past decade has averaged about 1.5
  pct, while the unemployment rate among blacks has spiralled to
  over 30 pct.
      Economists estimate that the government's spending target
  will rise to about 47 billion rand, with revenue budgeted at
  around 40 billion rand. This would leave a budget deficit
  before borrowing of about seven billion rand, or four pct of
  GDP.
      The government, having consistently overshot its own
  spending targets for more than a decade, also faces a
  credibility crisis over expenditure figures outlined in the
  budget, analysts said.
      "The budget is invariably too optimistic on expenditure,"
  said Standard Bank Ltd in a budget preview.
      Many analysts in the private sector are now paying less
  attention to the figures presented in the budget and are using
  their own estimates of expenditure to draw conclusions for the
  money and capital markets.
      South African Mutual's Lee believes government spending
  will again exceed the budget target and increase to around 49
  billion rand this year, leaving a deficit of between 5 and 5.5
  pct of GDP, compared with a three pct limit suggested by the
  IMF.
      "The IMF limit is obviously going to be abandoned," predicted
  one analyst, noting that South Africa has moved steadily away
  from austerity measures recommended by the IMF over the past
  two years.
      The policy shift followed a dramatic deterioration in the
  political situation and the onset of an economic crisis
  triggered by the refusal of major foreign banks to roll over
  loans to the country in September 1985.
      Against a background of Western economic sanctions, falling
  per capita incomes, rising joblessness and high inflation,
  government officials say economic growth is the prime
  objective.
      But private-sector economists caution that the government's
  ability to promote growth by boosting state spending is
  constrained by the need to maintain a large surplus on the
  current account of the country's balance of payments.
      Most of that surplus, this year estimated at around 2.5
  billion dlrs, will be swallowed up by repayments on the
  nation's estimated 23 billion dlr foreign debt in terms of an
  arrangement reached earlier this year with major international
  creditor banks.
      Within these constraints, economists believe Du Plessis has
  little room to manoeuvre.
      Analysts argue recent rises in civil service salaries and
  budgeted spending increases for the state-owned Post Office and
  South African Transport Services suggest that major tax
  concessions to individuals or corporations are unlikely.
      Du Plessis earlier this year announced small concessions
  for taxpayers in a mini-budget before the May 6 whites-only
  election. The poll delayed presentation of the national budget.
      "This will not be a very exciting budget," commented Harry
  Schwarz, spokesman on finance for the liberal Progressive
  Federal Party. "I do not expect any major tax cuts as all the
  sweets were given out before the election."
  

