It will take years to stabilise debt and reach fiscal consolidation targets – Mboweni
PARLIAMENT – Finance Minister Tito Mboweni on Wednesday signalled it would take National Treasury years to achieve its debt stabilisation and fiscal consolidation targets after the Covid-19 crisis dramatically increased borrowing and the budget deficit.
Tabling his Medium-term Budget Policy Statement, the minister put the deficit forecast for the current financial year at 15.7 percent of gross domestic product from 6.4 percent in 2019/20.
He said debt was expected to reach 81.8 percent of gross domestic product (GDP).
Mboweni cautioned that with debt stock skirting the R4 trillion mark, failure to rein in the country's worsening fiscal condition could trigger a sovereign debt default.
The finance minister had sounded a similar warning in his February budget, tabled weeks before the coronavirus pandemic reached South Africa, when he projected debt to stabilise at 87.4 percent of GDP in 2023/24.
On Wednesday, he was forced to revise this to 95.3 percent of GDP by 2025/26 and said debt-service costs had now become the fastest-growing item of spending on the state's books, bringing with it fiscal risks and scaring off foreign investors.
Similarly, he said fiscal consolidation could no longer be achieved in three years but over a five-year period, and would be achieved mainly by trimming the public wage bill, which has risen by 51 percent since 2008.
"Fiscal measures - primarily reductions to the wage bill - will narrow the budget deficit and stabilise debt over the next five years to return the public finances to a sustainable position,“ he said.
He said spending would be cut by R300 billion in the next three years and would be recalibrated towards job-creating investment in infrastructure.
African News Agency (ANA)