JOHANNESBURG – The Institute of International Finances (IIF) has warned that South Africa’s debt could reach as high as 95 percent of gross domestic product (GDP) in 2024 as a result of state-owned enterprises (SOEs) drainage on public finances.
The IIF said low growth, high interest payments, weak tax administration, and a decade of mismanagement were the main reason for revenue under-performance of the economy.
It said SOEs were crowding out investment and draining on public finances. The IIF said taking on Eskom’s guaranteed debt would increase the stock of sovereign debt by six percentage points. Eskom’s R450 billion debt has been described by the rating agencies as the single biggest risk to the country’s fiscal position.
“While successful design and implementation of reforms will take time, agreeing on the restructuring of Eskom and the national growth plan will be crucial first steps towards putting debt sustainability back on track,” the report said.
In February the government said the country’s net loan debt was expected to reach 49.9 percent of GDP to reach R2.52 trillion in the 2018/19 financial year, increasing by 55.5 percent to R3.47 trillion by 2021/22.