Debt to soar from R3.95 trillion to R5.2 trillion in the 2023/24 fiscal year
Cape Town – National Treasury has warned that the escalating debt of the country was superseding those of other countries in the emerging markets.
Treasury told MPs if the situation was not addressed, things would get worse.
Finance Minister Tito Mboweni had said in the Budget speech last month they want to stabilise debt in the next few years.
He had said debt will increase from R3.95 trillion to R5.2 trillion in the 2023/24 fiscal year and this was not sustainable.
The debt of the country was 80% of the Gross Domestic Product and National Treasury said yesterday other emerging economies like South Africa their debt 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 gets worse.
“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 the 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 are sitting with a debt of 30% of GDP and this was manageable.
Sishi also denied that 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 has been expanding every year, he said.
The government has always spent more than it gets in revenue, said Sishi.