Cape Town - South Africa expects a slightly wider budget deficit of 4.1 percent of GDP for 2014/15 from the 4 percent seen in February, but will rein in spending and raise taxes to get the gap down to 2.5 percent in three years, the Treasury said on Wednesday.
In its medium term budget policy statement, which sets out spending plans and growth forecasts for the next three fiscal years, the Treasury said weak growth in Africa's most advanced economy had impacted tax revenue.
“The budget deficit is high, debt levels have approached the limits of sustainability,” it said.
“Without an adjustment, it is likely that South Africa's sovereign debt would be downgraded to “sub-investment grade”, risking impaired access to credit markets.”
The government would reduce its spending ceiling and raise tax revenue over the next two years, stabilising debt at nearly 46 percent of GDP by 2017/18, before starting to decline.