Moody’s expects SA’s debt burden to rise

CREDIT ratings agencies have remained unconvinced by Finance Minister Tito Mboweni’s Budget Review, expressing concern over South Africa’s rising debt levels.

Mboweni last week said the national gross loan debt would increase from R3.95 trillion in the current fiscal year to R5.2trln in 2023/24.

The government’s borrowing requirements were expected to remain well above R500 billion a year, with the debt stabilising at 88.9 percent of gross domestic product (GDP) in 2025/26.

However, the government now expected to record a consolidated budget deficit of 14 percent of GDP compared with its October forecast of 15.7 percent.

Moody’s on Friday said the slightly lower deficits would not prevent the debt from rising, because downside risks remain elevated over public sector wages and support to state-owned enterprises.

Moody’s senior credit officer Lucie Villa said they still expected that the government’s debt burden would rise to reach 100 percent of GDP by the 2024 financial year.

Villa said the pace of reduction in deficits was slower given the government’s decision to withdraw R40bn of tax-raising measures and a milder recovery in revenue.

“Although we have also revised down our deficit forecasts, we continue to expect a slower pace of fiscal consolidation and wider deficits than the government based on our expectations of higher primary spending and interest spending,” Villa said.

“Moreover, risks remain elevated that the government’s debt burden and affordability deteriorate significantly more rapidly than our baseline.”