Treasury warns of rising debt

THE National Treasury has again warned of the country’s rising debt, saying if it was not contained it would lead to a debt crisis.

Treasury said the pandemic had made the situation worse for the government as there was little cash available in the fiscus. The government announced a R500 billion package to deal with the outbreak of Covid-19.

Senior Treasury officials told the joint committees of finance in Parliament yesterday that despite government spending increasing substantially in the past 10 years, this had not been matched by growth. The economy has stagnated in the last 10 years.

The chief director in the National Treasury, Edgar Sishi, said the budget deficit would increase from 6.8% to 15.7%. The debt would rise to 87% in 2023 compared to 50.5% in 2016/17.

He said borrowing had increased by R344.2bn to R777.9bn.

Sishi said if the debt was not contained it would have long-term implications for the economy.

“We can take steps against the debt crisis if we take action,” he said.

The economy has been stagnant in the last decade with negative growth rates in the past few months due Covid19. Sishi said Covid-19 increased debt to 87% in three years.

“We know that higher government spending has not translated to higher growth,” he said, adding that Covid-19 provided an opportunity to cut waste in government. Increase in spending must be matched with increase in revenue, he said.

“Rising debt service costs are overcrowding other spending areas. We agree with Cosatu and others that the quality of borrowing is crucial.

“We need to focus on investment. “The Covid-19 pandemic has exacerbated an already weak fiscal position leaving very little fiscal space to respond,” said Sishi.

He said the debt could be contained by building infrastructure in the country and making structural reforms in the economy.