SA debt to top 100% of GDP
2025: BUT THIS YEAR RISING TO 80.5% OF GDP
Mboweni warned lawmakers of sovereign debt crisis last week.
South Africa’s debt levels will exceed 100% of gross domestic product (GDP) in 2025 and rise to almost 114% before the end of the decade, according to a document presented by Finance Minister Tito Mboweni.
Mboweni made the presentation to the National Economic Development and Labour Council on Friday, according to posts on his Twitter and Facebook pages. It shows preliminary estimates of gross government debt climbing to 80.5% of gross domestic product in this fiscal year, compared with a projection of 65.6% in February.
The trajectory presented doesn’t show debt reaching a peak by 2028-29.
Mboweni is due to present a special supplementary budget on Wednesday, which will include the redirecting of R130 billion of spending to help fund a R500 billion rescue package announced by President Cyril Ramaphosa.
The revised fiscal plans will reflect the devastation wrought on the economy by the coronavirus and the associated lockdown. The restrictions have weighed on tax income as many businesses couldn’t operate and some have shut down permanently.
“The budget process is in its final stages and still being finalised,” Treasury spokeswoman Mashudu Masutha-Rammutle said. “This includes data and estimates. In this regard, any information published now, especially from unverified leaks, is potentially inaccurate compared to what will be tabled.”
Mboweni will also probably present revised economic growth and budget-deficit numbers. He said in April the tax take could fall by 32% and the fiscal shortfall could swell to more than 10% of GDP, compared with the 6.8% of GDP projected in February. The gap could be 13.7% of GDP this fiscal year, according a Bloomberg survey. The economy will contract 7% this year, according to the central bank.
Public-sector debt may rise to R6.4 trillion over the next three years, Martin Kingston, vice president of business group B4SA, said in a presentation at Friday’s meeting. The country’s borrowing need may be as high as R3.4 trillion over three years including private sector needs, he said.
“In the absence of significant structural reforms, debt-to-GDP levels will increase to unsustainable levels over the next three to five years,” he said. Government bailouts
The country’s finances have deteriorated rapidly over the past decade, partly due to a series of bailouts for loss-making stateowned companies including Eskom and South African Airways. Mboweni on Thursday told lawmakers that the government must cut spending to avoid a sovereign debt crisis by 2024.
A debt crisis would force the nation to seek help from the International Monetary Fund, which would result in public service and state pensions being slashed, along with “all kinds of structural reform programs we do not want”, Mboweni said at the parliamentary meeting.
The pandemic has already forced the ruling ANC to break its resistance to borrowing from the IMF and request a $4.2 billion loan to cover virus support. The lender has not yet approved the funding, which must help pay for the R500 billion stimulus package. The New Development Bank approved a $1 billion emergency loan for South Africa, it said in an e-mailed statement on Saturday.
Debt crisis would force nation to seek help from IMF