Over 20% of collected tax goes toward interest on past debt, says Minister of Finance Tito Mboweni
JOHANNESBURG – Finance Minister Tito Mboweni said on Wednesday that out of every rand that South Africans pay in tax, 21 cents goes to paying the interest on the country’s past debts.
Mboweni said debt was the country’s weakness adding that South Africa had accumulated far too much debt and the current downturn was set to add more.
“This indebtedness condemns us to ever-higher interest rates. If we reduce debt, we will reduce interest rates for everyone and we will unleash investment and growth.
“So today, with an eye on the future, we set out a strategy to build a bridge to recovery. Our Herculean task is to close the mouth of the Hippopotamus! It is eating our children’s inheritance. We need to stop it now! Our Herculean task is to stabilise debt,” he said.
This Supplementary Budget sets out a roadmap to stabilise debt, by improving our spending patterns, and creating a foundation for economic revival, according to the minister.
“Most of our energies and resources have been focused on the Covid‐19 pandemic. We have quickly adopted temporary countercyclical fiscal and monetary policy measures. After the storm ends, we must work just as quickly to emerge with a sustainable fiscus.
“We have many strengths. These include our young and ambitious people; Our institutions, a robust and vibrant democracy, independent judiciary and our commitment to social justice progress; and our economic strengths: a diverse industrial base, a flexible exchange rate, stable inflation, and deep domestic capital markets that allow us to borrow mainly in rand,” he said.
Mboweni said the historic nature of the Covid-19 pandemic and economic downturn had made it necessary to table the Supplementary Budget.