Weekend Argus (Saturday Edition)
Concern over SA’s growing debt levels
THE National Treasury has warned that the escalating debt of the country was superseding those of other countries in the emerging markets.
The Treasury told MPs yesterday if the situation was not addressed, things would get worse.
Finance Minister Tito Mboweni had said in the Budget speech last month they wanted to stabilise debt in the next few years.
He had said debt would increase from R3.95 trillion to R5.2trln in the 2023/24 fiscal year and this was not sustainable.
The debt of the country was 80% of the Gross Domestic Product and the National Treasury said yesterday the debt of other emerging economies like South Africa was sitting at 60% of GDP.
Acting head of the budget office in the National Treasury Edgar Sishi said debt service costs were crowding out other expenditure items in the Budget.
He said the debt would have to be reined in before it worsened.
“South Africa’s debt situation is worse than its emerging market peers. If you look at the fiscal data of the IMF
published last month, it shows that the average emerging market country has a debt level of about 60% of GDP. We have a debt level of about 80% of GDP,” said Sishi.
“We have debt levels that are close to advanced economy territory and not in line with our peers, meaning our situation is worse and requires significant action. If we don’t reverse these trends, the economy will not be able to generate sufficient revenue for the state to service its debt.
“At the moment, R1 out of R5 raised in tax revenue is going towards servicing debt and this cannot continue because this is what is crowding out funds from critical areas of government service delivery and this trend needs to be arrested otherwise adjustments required in future years will be worse than what we are proposing in this Budget,” said Sishi.
He said a lot of money was being spent on servicing debt.
There should be a move to reduce it to be affordable.
When he took over as finance minister almost three years ago, Mboweni said some of the countries were sitting with a debt of 30% of GDP and this was manageable.
Sishi also denied that the National Treasury had tabled an austerity budget as they had cut down on social grants and other key departments.
He said the Budget has been expansionary in the last 10 years. The envelope of government had been expanding every year, he said.
The government had always spent more than it received in revenue.