South Africa’s debt could reach as high as 95% of GDP by 2024, the Institute of International Finance (IIF) said in a report on Wednesday (2 October).

According to the group, low growth, high-interest payments, and a decade of mismanagement are the primary reasons for this increasing debt.

Eskom was also named as one of the key causes for concern, and a plan to shift the struggling SOE’s debt to the government may add as much as six percentage points to South Africa’s sovereign debt, the report said.

It added that there was still a possibility load-shedding, which may lead to further contractions.

“The key for an improvement of the situation is the implementation of the national growth plan and Eskom restructuring blueprint,” the IFF said.

“Investors and rating agencies will follow the October and February budget announcements closely.”

Warning

South Africa has run persistent budget deficits since the global financial crisis.

Between 2013 and 2018, the size of these deficits moderated marginally, while the primary deficits (excluding interest payments) shrank substantially.

This adjustment was achieved mainly through higher taxes; spending continued to increase throughout this period, especially spending on interest payments.

However, since the previous Monetary Policy Review in October 2018, the fiscal situation has deteriorated sharply. The deficit is now expanding again, mainly due to bailouts for Eskom.

In a report on Tuesday, the Reserve Bank warned that government debt has doubled from less than 30% of GDP before the 2008 global financial crisis to nearly 60%.

Ratings agency Moody’s has previously anticipated debt levels will reach 68% of GDP by 2021.

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