This paper investigates the usefulness of different definitions of the budget deficit and
their impact on fiscal sustainability. The analysis shows that a number of alternative
definitions of the budget deficit are useful, some even extremely useful, for analyzing
the impact of fiscal policies. The choice among the alternatives depends mainly on the
purpose for which it is intended. However, despite the usefulness of the different
definitions of the deficit, their order of magnitude in South Africa differs only marginally
from that of the operational deficit. In our analysis of fiscal sustainability, the full range of
possibilities have been accommodated in the different scenarios with the operational
deficit. With a finite time horizon medium term current fiscal policy can be said to be
sustainable or intertemporaly consistent, if it is able to achieve a given target level of the
debt/GDP ratio. Unlike the infinite time horizon case, this target level might be nonzero.
In this paper the latter case has been investigated. Three possible alternatives
were tested and the results indicate that there is little room for fiscal maneuverability in
South Africa without jeopardizing fiscal discipline policies. In the longer term, different
definitions of the budget balance do not change this reality.