SOUTH African finance minister, Tito Mboweni, intended to narrow the country’s account deficit and stabilise debt by 2023/2024, but he also warned that “public finances are dangerously overstretched”, according to a report by BusinessLive.
In his first ‘supplementary budget’ tabled in parliament on Wednesday, Mboweni said debt would be stabilised at 87.4% of GDP. The cabinet had also adopted a target of a primary surplus by 2023/2024.
Mboweni said the National Treasury’s early projection was that gross national debt will be close to R4-trillion, or 81.8% of GDP, by the end of this fiscal year compared to an estimate of R3.56Tr or 65.6% of GDP projected in February.
Debt-service costs will increase from R204.8bn in 2019/2020 to R236.4bn in 2020/2021, and are expected to reach R301.1bn, or 5.4% of GDP, in 2022/2023.
“The public finances are dangerously overstretched. If we remain passive, economic growth will stagnate. Our debt will spiral inexorably upwards and debt‐service costs will crowd out public spending on education and other policy priorities,” Mboweni said.
“We are already spending as much on debt‐service cost as we do on health in this financial year. Eventually, the gains of the democratic era will be lost.”
Mboweni stressed that debt is the weakness of the fiscus — too much has been accumulated and the economic downturn will add more. “This year, out of every rand that we pay in tax, 21c goes to paying the interest on our past debts. This indebtedness condemns us to ever higher interest rates.”