The country’s finances have deteriorated rapidly over the past decade.
South Africa’s debt levels will exceed 100% of gross domestic product by 2024-25 and rise to almost 114% by 2028-29, according to a document presented by Finance Minister Tito Mboweni and seen by Bloomberg.
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 gross government debt will climb to 80.5% of gross domestic product in this fiscal year, compared with a projection of 65.6% in February. The trajectory presented shows no sign of stabilising by 2028-29.
The Herculean task of closing the hippopotamus mouth. pic.twitter.com/aQL7iHNPmI
— Tito Mboweni (@tito_mboweni) June 20, 2020
Mboweni is due to present a special supplementary budget on June 24 that will reflect the devastation wrought on the economy by the coronavirus as well plans to fund a R500 billion stimulus package.
“The budget process is in its final stages and still being finalised,” Treasury spokeswoman Mashudu Masutha-Rammutle said by text message. “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.”
The country’s finances have deteriorated rapidly over the past decade, partly due to a series of bailouts for loss-making state-owned companies including Eskom Holdings 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 programmes we do not want,” Mboweni said at the parliamentary meeting.
The pandemic has already forced the ruling African National Congress 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.