The Finance Minister, Enoch Godongwana, has painted a bleak picture of the state of the country's finances saying government spending has exceeded revenue since the 2008 global financial crisis.
Tabling his medium-term budget policy statement in the National Assembly on Wednesday, he said the rising annual budget deficits have reached an extent where the government will have to borrow an average of R553 billion per year over the medium term.
"As a result, gross debt rises from R4.8 trillion in 2023/24 to R5.2 trillion in the next financial year. By 2025/26, it will exceed the R6 trillion mark.
"We now expect gross government debt to reach 77 percent of GDP by 2025/26. This is higher than the level we forecast in February," he said.
Godongwana said over the next three years, debt-service costs as a share of revenue will increase from 20.7 percent in 2023/24 to 22.1 percent in 2026/27.
"The cost, or interest of this debt, for next year alone, amounts to around R385.9 billion. Over the MTEF, interest costs amount to R1.3 trillion. This is more than we spent on police, education, or health," he said.
It is important, however, to point out that our debt levels and rising debt service costs are not problems in and of themselves.
"Our challenge is that rising debt service costs are crowding out important social spending, and our economy has not grown fast enough to support increasing expenditure or our current debt levels," he said.
To curb government spending, the minister said the government would be reviewing and reconfiguring the structure and size of the state, with a joint plan being prepared to review government departments, entities, and programmes over the next three years.
The minister said the policy statement sets out the government's strategy to avoid "a fiscal crisis" and to prevent the build-up of systemic risks to the economy.
Godongwana said the mini-budget also recognises that the government must respect the budget constraint, to
preserve the sustainability of government services that are being crowded out by debt service costs.
"We propose a strategy of targeted spending adjustments based on policy priorities, and a reconfiguration and rationalisation of the state, which includes closing or merging ineffective entities and programmes, and enhancing the complementarity of its functions.
"The decisions we have taken include spending reductions and reprioritisation, while also taking concrete steps to support growth, " Godongwana said.
