Monday, January 24

South Africa’s state debt is approaching 100% of the estimate for the fiscal year

South African government debt came close to 100% of the National Treasury forecast for the fiscal year to March 2022 in seven months, increasing the risk that liabilities will exceed official estimates.

Gross debt amounted to R4.2 trillion ($ 261 billion), or 97.3% of the government estimate as of October 31, according to the Reserve Bank of South Africa Quarterly Bulletin released on Wednesday. The National Treasury revised its debt projection for the current fiscal year to R4.31 trillion, or 69.9% of gross domestic product, in last month’s medium-term budget policy statement from its February estimate of R4.38 trillions.

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Central bank data shows that gross debt increased 12% year-on-year to R4.16 trillion, or 68.6% of GDP, as of September 31. The increase reflected a significant increase in the outstanding balance of domestic debt, which accounted for more than 90% of total loans, the Pretoria-based Reserve Bank said. External debt obligations decreased during the same period, he said.

Rising debt and debt service costs, the fastest growing spending item in the budget since 2011, are key risks to South Africa’s fiscal sustainability, as continued damage to the economy from the pandemic The coronavirus aggravates a deterioration in public finances caused by years of overspending. , mismanagement and alleged corruption.

The International Monetary Fund last week reiterated calls for the country to introduce a debt anchor in its budget to “supplement the existing nominal primary spending ceiling to guide consolidation and limit the accumulation of debt when economic activity will remain persistently weak. “.

Even before the pandemic, South Africa’s economy was slow. It entered the 97th month of a weakening cycle in December, according to central bank data.

The Reserve Bank will begin empirical work to identify the lowest inflection point in the cycle early next year, said Iaan Venter, a senior manager in its economic statistics department, in an emailed response to questions. While a contraction in economic activity in the third quarter of this year and the fallout from a fourth wave of coronavirus infections mean that South Africa’s economic recovery has lost some momentum, it does not necessarily negate a change in the cycle, he said.

Other key points:

  • There were inflows of foreign direct investment of R557.9 billion in the three months to September, compared to inflows of R17.4 billion in the previous quarter. The increase was largely due to the acquisition by Prosus NV of approximately 45% of Naspers Ltd. from existing shareholders.
  • Portfolio investment outflows of R370.9 billion were recorded in the third quarter, mainly as non-resident investors exchanged shares held in Naspers for shares in Prosus.

© 2021 Bloomberg

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