Government debt escalates to R3.7 trillion, says Reserve Bank
JOHANNESBURG – THE SOUTH African government’s total gross loan debt has increased sharply as the borrowing requirements continue to weigh on the fiscus on the Covid-19 impact.
The SA Reserve Bank (SARB) said on Tuesday the total gross loan debt of the national government had increased by 20.3 percent year-on-year to R3.7 trillion as at 30 September.
This was an equivalent of 75.2 percent of gross domestic product (GDP) and was inching closer to the total gross loan debt forecast of 81.8 percent of GDP by the end of fiscal 2020/21.
In October, Finance Minister Tito Mboweni warned that the stock of gross debt would rise from roughly R4 trillion this year and to R5.5 trillion in 2023/24.
The SARB’s Quarterly Bulletin showed capital outflows on South Africa’s financial account of the balance of payments grew larger to R38.6 billion in the third quarter following a revised outflow of R24bn in the second quarter.
SARB said the preliminary non-financial public sector borrowing requirement had doubled to R369bn in the first six months of fiscal 2020/21, compared with the same period of the previous fiscal year.
“This reflected the significantly larger cash deficits of both national government due to continued revenue shortfalls and the social security funds due to Covid-19 relief payments,” it said. In April, the government announced a R500bn stimulus package with R130bn coming from a reprioritisation of the budget.
The rest of the funds were raised from local sources, as well as from global partners and international finance institutions.
The bank said the public sector’s net issuance of listed bonds in the domestic primary bond market increased by 51.3 percent year-on-year to an all-time high of R474bn in the first 11 months of 2020.
It said this resulted from funding pressures and substantial national government debt issuance due to revenue shortfalls, Covid-19-related spending and the financing of distressed state-owned companies, among other factors. Right now, the government is borrowing at a rate of R2.1bn per day.
Old Mutual’s Dave Mohr said the problem with the South African economy is that it was weak even before the pandemic.
Mohr said high unemployment, unreliable and costly electricity and rapidly rising government debt had worsened the country’s already weak position.
“The Reserve Bank’s monetary response was also less ambitious than otherwise might have been the case, since it remains worried that there could be a debt crisis and currency collapse,” Mohr said.
Meanwhile, the bank’s composite leading business cycle indicator increased 3.1 percent on a month-to-month basis in October, following a 1.7 percent rise in September.
The SARB said that all 10 of the available component time series increased during the month.
SARB, however, said despite the strong rebound in the third quarter, real GDP was only at a level similar to that in the first quarter of 2013.