SA must manage debt better, says Godongwana

Finance Minister Enoch Godongwana has told Parliament that in order for government to achieve its goals of, amongst others, inclusive growth and reducing unemployment, the country must better manage its debt.

He was delivering the Medium-Term Budget Policy Statement (MTBPS), in which he revealed that government debt is anticipated to exceed R6.05 trillion, or 75.5 % of gross domestic product (GDP), in 2025/26.

“Debt has risen too fast and is too high. We know that our debt is unsustainable, because debt-service costs have become the largest component of our spending, and it is rising faster than economic growth. Debt-service costs will reach R388.9 billion in the current financial year.

“Put differently, this means for every one Rand of revenue that government raises this year, 22 cents of this is paid in debt-service costs,” he said.

Godongwana said to deal with this, government has taken “difficult steps to reduce the budget deficit”.

Over the medium term, the main budget deficit is expected to fall from 4.7% of GDP in 2024/25 to some 3.4% in 2027/28.

The primary budget surplus is expected to rise to 1.8% of GDP.

“We have restrained spending and maintained stable tax collection. As a result of our measures, government achieved a primary budget surplus in 2023/24, for the first time in 15 years. As I said earlier, the surplus is needed for us to stabilise debt.

“The primary surplus is not a pot of money. Rather, it is the difference between what government spends, excluding debt-service costs and what government collects in revenue.

“The primary surplus will be sufficient for debt to stabilise at 75.5 % in 2025/26. Debt will then decline over the rest of this decade. The key impact of this is that debt service costs will also stabilise and begin to decline over the next few years,” Godongwana said. – SAnews.gov.za