Mboweni warns MPs over debt
FINANCE MINISTER Tito Mboweni has warned that South Africa should avoid going to the International Monetary Fund (IMF) if it fails to reduce its mounting debt.
This was after MPs also said yesterday they backed Mboweni to reduce the debt, which is close to reaching 60% of the Gross Domestic Product (GDP).
Mboweni said if it reached that situation, it would lead to South Africa going to the IMF – and this would result in surrendering the country’s public finances to the IMF.
Mboweni was appearing before the joint committees on finance and appropriations to explain his Medium-Term Budget Policy Statement delivered on Wednesday.
Debt is the fastest growing expenditure item in the budget. It has been increasing over the past few years, but the National Treasury says it will stabilise in the 2023/24 financial year.
Mboweni said something needed to be done urgently to reduce the debt.
“If we don’t do anything (soon) we will reach a (debt to) GDP ratio of above 60%. If that happens, you are close to having discussions with the IMF. They will come to run your finances. Let’s do whatever we can to avoid that situation,” said Mboweni.
President Cyril Ramaphosa also warned a few months ago that they would not want to go to the IMF to seek money.
He said the conditions the IMF imposed made it difficult to prioritise spending, and it would force (the government) to cut their social spending budget.
Chairperson of the standing committee on appropriations Pinky Phosa said they supported Mboweni in his efforts to prevent the situation arising of having to go to the IMF.
She said everything should be done to cut down on the debt. “The minister is right, we should avoid going to the IMF,” said Phosa.
David Maynier of the DA wanted to know at what point the debt would be sustainable.
EFF deputy leader Floyd Shivambu said Mboweni should clarify what made him think that if the debt reached 60% of GDP, South Africa would become a case for the IMF.
Sheila Shope-Sithole of the ANC said she was very scared of the IMF, and this would not be the way to go.
Director-General in the National Treasury Dondo Mogajane said they needed to engage on what the country’s debt ceiling was.
He said this issue was often discussed in the National Treasury. However, he said when the debt was huge, it was a matter of serious concern.
Deputy Minister of Finance Mondli Gungubele said he agreed with Mogajane that the country would need to discuss the question of the debt ceiling.