Gross government debt is expected to stabilise at 71.4% of the gross domestic product (GDP) in 2022/23 — two years earlier and at a lower level than projected in the 2022 Budget. 

In the Medium Term Budget Policy Statement (MTBPS), which was on Wednesday delivered by Finance Minister Enoch Godongwana, National Treasury says debt stabilisation in the current year reflects the impact of several changes since February. 

“Nominal GDP increased as a result of higher GDP inflation, given high global and domestic prices. At the same time, the primary budget balance – revenue less non-interest spending – improved. 

“These changes outweigh the adverse effects of higher interest costs and the weaker exchange rate.” 

The department said this was due to global events since February, which had a profound inflationary impact. 

“These factors outweigh the adverse impact of higher interest rates and a weaker exchange rate. Net loan debt – which is gross loan debt, less cash balances – will stabilise at 69% of GDP in 2024/25.” 

Over the next three years, Treasury anticipates that the consolidated budget deficit will narrow from 4.9% of GDP in 2022/23 to 3.2% of GDP in 2025/26 

“This will reduce the need to issue new debt and allow government to better manage the spike in debt redemptions, rein in debt service costs and gradually restore growth in the baselines of key service delivery and infrastructure programmes,” Treasury said. 

The department said slower growth in debt and interest payments would encourage private investment, as high debt and interest payments raised borrowing costs, which made it difficult for businesses and households to access finance. 

Government will, over the next three years, implement a fiscal strategy aimed at consolidating public finances and reducing risk to the country’s economy. 

The department outlined the medium-term fiscal strategy’s three objectives as being:

 – Reducing the budget deficit and stabilising debt as a percentage of gross domestic product;

 – Supporting economic growth by maintaining a prudent fiscal stance and directing resources towards infrastructure, and the fight against crime and corruption, and

 – Reducing fiscal and economic risks by using higher-than anticipated revenues to address contingent liabilities and developing buffers to deal with disaster risks.

Source: South African Government News Agency