JOHANNESBURG - SOUTH Africa is “no way near debt distress”, central bank governor Lesetja Kganyago said on Friday.
This despite the country’s debt-to-gross domestic product (GDP) ratio nearing the 100 percent mark, seen as a red line for investors and credit rating agencies.
Speaking online during an African Development Bank panel discussion, Kgamyago warned of the dangers of implementing fiscal austerity during a prolonged contraction of the economy.
“Debt is an outcome of your fiscal policy stance, so for as long as you are running a fiscal policy deficit you will have debt,” Kganyago said. “(But) it could actually be self-defeating if you try to implement fiscal consolidation during a growth crisis.”
Africa’s most developed economy, and the hardest hit by Covid-19 with more than 1.5 million confirmed cases, was in recession before the pandemic struck, accumulating a large stock of debt over the last decade to plug widening budget deficits.
In last month’s Budget, the Treasury forecast the deficit to more than double to 14 percent of GDP in the 2020/21 fiscal year. Debt as a ratio of growth is seen reaching 87.3 percent by 2023.