Cape Town - South Africa's debt-to-GDP ratio remains sustainable, Finance Minister Pravin Gordhan said on Wednesday.
In his 2013 Medium-Term Budget Policy Statement (MTBPS), tabled in Parliament, he said a recent assessment by the International Monetary Fund had reached the same conclusion.
Government's debt management strategy worked to ensure debt sustainability, to keep the cost of debt as low as possible, maintain access to global capital markets, and diversify funding instruments.
The strategy also ensured continued bond market development, drawing on the strength of South Africa's deep and liquid capital markets.
To limit external vulnerability, debt was largely denominated in domestic currency. Maturities were increasingly long term.
The main Budget net borrowing requirement was projected to increase from R168.5 billion in 2013/14, to R183.9bn in 2014/15, before declining to R164.9bn in 2016/17.
National government net debt was projected to reach 39.3 percent of GDP in 2013/14, and 43.9 percent in 2016/17.
The weaker rand exchange rate had pushed up the value of foreign denominated debt, and inflation had had the same effect on inflation-linked debt.
Deterioration in the economic growth outlook had increased the debt-to-GDP ratio.
Rising bond yields, which were adjusting to anticipated changes in US monetary policy, also contributed to a less benign debt-to-GDP trajectory.
Over the longer term, debt was expected to stabilise, but later than previously anticipated and at a higher level relative to GDP.
The current forecast showed net debt stabilising at 44 percent of GDP in 2017/18.
Over the medium-term, government's debt management strategy would focus on minimising refinancing risk to accommodate redemptions.
To mitigate this risk beyond the medium-term, government would continue to build cash reserves, and continue to switch short-term for longer-term debt if market conditions allowed. - Sapa