Finance minister Tito Mboweni has released his medium-term budget policy statement (MTBPS), showing South Africa’s debt problem.

The MTBPS shows that despite large fiscal deficits over the past decade, in which South Africa’s debt-to-GDP ratio has risen sharply, economic growth has not rebounded.

“These deficits, which had provided some short-term support to the economy, are increasingly harmful to economic growth, leading to rising interest rates and uncertainty,” it said.

“As debt has mounted, a growing share of limited public resources has been absorbed by interest payments, which increasingly crowd out spending on social and economic investment.”

The below graph shows the breakdown of every R1,000 spent by economic classification in 2019/20 at the consolidated national and provincial government level.

Limited options

The MTBPS adds that the options to stabilise the fiscus are becoming increasingly limited.

“Government’s economic reform agenda will boost confidence and investment.

“However, these reforms are only expected to begin yielding results over the next several years, implying continued weakness in revenue collection over the period ahead,” it said.

Moreover, following several years of tax increases, revenue options are constrained, it said. It highlighted that the tax-to-GDP ratio is close to its 2007/08 peak of 26.4% and that the 2019 budget included R10 billion in tax increases for 2020/21.

It added that further tax policy measures to raise this amount will be announced in the 2020 Budget.

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