Finance Minister Tito Mboweni on Wednesday said South Africa's budget deficit would average 6.2 percent and, with its debt and debt-service costs continuing to rise, the country's debt to GDP ratio will reach 71.3 percent in 2022/23.
"This is a serious position to be in," the minister warned as he tabled his medium-term budget policy statement (MTBPS) in Parliament, two days before Moody's is expected to publish an update on the country's credit rating."
Mboweni stressed that the government saw a looming debt trap and was determined to avoid it.
The deficit for the current financial year is forecast at 5.9 percent of GDP in the current financial year. The national debt has exceeded R3 trillion and was expected to rise to R4.5 trillion in the next three years.
The minister said the growth forecast for the year has been slashed to 0.5 percent from 1.5 percent in February when he tabled the national budget. Revenue collection is now forecast to be four percent, or R53 billion, less than expected and revenue forecasts in the near-term future remained cautious.
It meant that the growth outlook was far too poor to support the constitutionally enshrined vision of improving the quality of life of all citizens, Mboweni said, and incisive measures were needed to buoy the economy and shore up public finances.
"There is no status quo option," he said.
"Over time, the country would likely face mounting debt service costs and higher interest rates and may enter a debt trap. The unemployment crisis would worsen, and government debt could balloon. This is an option we are determined to avoid."
Mboweni hinted at putting stronger brakes on the growth of the national wage bill -- conceding that encouraging early retirement had not yielded the expected savings -- and hiking taxes.
Traditionally tax increases are only announced in the February budget, and the minister said this is when he would announce additional measures to support public finances.
He reiterated that public enterprises must be weaned off the national budget. Eskom would, after its latest R59 billion lifeline, only get support from the fiscus in the support of loans. And Mboweni declared that there would be no debt relief for the power utility until it had committed to implementing government's plans to restructure it to separate the generation, transmission and distribution capacities, as set out in a blueprint on the eve of his MTBPS, and shown "there is enough progress" in this direction.
Mboweni signaled that South African Airways was unlikely to ever become sustainable in its current form and welcomed talks with potential equity partners.
He ventured that other businesses with outdated business models that posed a risk to the fiscus should be closed, and warned that in those that remained there would be no more businesses and salary increases for management staff that failed to meet targets.
- African News Agency (ANA)
