Nene: SA faces challenging outlook
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Johannesburg - South Africa faces a challenging fiscal outlook in the next few years because of rising government debt and slow economic growth, Minister of Finance Nhlanhla Nene said.
“The changed environment has significant implications for our fiscus,” Nene said in a speech in Johannesburg.
“Rising global interest rates has pushed up the costs of servicing government debt.”
Africa’s second-largest economy will probably expand 1.8 percent this year, the slowest pace since a 2009 recession, straining the government’s ability to meet its budget-deficit targets, Nene said in an interview last month.
The government has pledged to reduce the gap to 2.8 percent of GDP in the year through March 2017 and restrict debt to 48.3 percent of GDP.
In June, Standard & Poor’s lowered South Africa’s foreign-currency rating to one level above junk, while Fitch Ratings assigned a negative outlook to the country’s creditworthiness.
Ratings companies have warned of further downgrades as growth slows and fiscal targets come under pressure.
“The key challenges to our economic growth are largely domestic,” Nene said.
“The growth of our economy is not sufficient to address out challenges of poverty, unemployment and inequality.”
Nene will present the mid-term budget update to lawmakers in Cape Town on October 22.
While the expenditure ceiling the National Treasury has committed itself to in the last budget remains in place, the government may have to adjust spending on some items, he said.
The rand dropped 0.5 percent to 10.9796 per dollar at 9:31 p.m. in Johannesburg.
“If this proves insufficient, additional measures will have to be considered to meet our fiscal objectives,” Nene said.
Government will have “to make difficult choices and trade-offs in the period ahead.” - Bloomberg News