SA debt increase is strategic: Zuma

The big increase in South Africa’s national debt relative to GDP in the past five years is a strategic move aimed at spurring economic recovery, President Jacob Zuma said on Thursday.

“The increase… reflects the adoption of a counter-cyclical strategy in response to the global economic crisis in 2008/9,” he said in a written reply to a parliamentary question.

“If we had simply cut spending in response to the fall in revenue during the crisis, the economy is unlikely to have recovered from the recession.”

The question was posed by Congress of the People leader Mosiuoa Lekota, who wanted to know whether escalation in the level of such debt, from 27 percent of gross domestic product (GDP) in 2008, to “45 percent or more estimated for 2015”, had eroded the fiscal space needed to bring about “radical” socio-economic transformation.

In his state of the nation address in June, Zuma said the country had to “embark on radical socio-economic transformation” to push back the triple challenges of poverty, inequality and unemployment.

In his reply on Thursday, he said his government had identified a number of measures “in order to take account of the more limited fiscal space”.

These included an emphasis on local procurement, with the aim of ensuring at least 75 percent of government purchases were from local producers, and “re-prioritising” government spending, to make sure it supported more inclusive and sustainable growth.

“This has in particular meant shifting resources toward infrastructure and improving the impact of the critical services of health, education and policing.”

Further, through its infrastructure build programme, the government was mobilising increased investment off-budget, through state-owned companies and development finance institutions.

“The effect is both to transform our economy and to provide an increased stimulus without increasing government debt,” Zuma said.

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SA debt increase is strategic: Zuma