Cape Town - South Africa plans to borrow more abroad and issue more domestic debt in the coming fiscal year to plug a yawning budget shortfall, the Treasury said on Wednesday.
South Africa's inclusion in Citi's World Government Bond Index, and a continuing hunt for higher-yielding emerging market debt, has fuelled increased demand for local bonds.
The Treasury will target this demand to borrow about $1.5 billion from overseas markets over the next three years.
Offshore investors held a record 35.9 percent of South African debt in 2012, surpassing local pension funds for the first time.
Issuance in the domestic market, which helps plug the budget shortfall, is expected to increase to 165 billion rand ($19 billion) a year over the three years to 2015/16.
Treasury said it would also draw down on its cash reserves to fill its borrowing requirements. Cash balances are likely to decline to 151.4 billion in 2014/15 from 194.8 billion in 2011/12, and increase in 2015/16 to pay redemptions.
South Africa's rising debt is a long-standing concern of the ratings agencies, all three of whom cut South Africa's credit rating last year.
The government said it was reviewing its “substantial investments in state-owned companies” and will consider selling some assets to get extra funds.
“Some of these companies hold cash, excess financial reserves or assets that are not associated with public service delivery.
“Where such resources can be more productively applied to support policy priorities, the sale of such assets - or the return of surplus funds to the fiscus - will be considered.”
Treasury said 43 percent of state-owned companies' funding requirement for infrastructure development will be through borrowing in debt markets, while the rest will be from internal cash of the companies. - Reuters