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).<\/p>\n
According to the group, low growth, high-interest payments, and a decade of mismanagement are the primary reasons for this increasing debt.<\/p>\n
Eskom was also named as one of the key causes for concern, and a plan to shift the\u00a0struggling SOE’s debt to the government may add as much as six percentage points to South Africa\u2019s sovereign debt, the report said.<\/p>\n
It added that there was still a possibility load-shedding, which may lead to further contractions.<\/p>\n
“The key for an improvement of the situation is the implementation of the national growth plan and Eskom restructuring blueprint,” the IFF said.<\/p>\n
“Investors and rating agencies will follow the October and February budget announcements closely.”<\/p>\n
Warning<\/strong><\/p>\n South Africa has run persistent budget deficits since the global financial crisis.<\/p>\n Between 2013 and 2018, the size of these deficits moderated marginally, while the primary deficits (excluding interest payments) shrank substantially.<\/p>\n This adjustment was achieved mainly through higher taxes; spending continued to increase throughout this period, especially spending on interest payments.<\/p>\n 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.<\/p>\n 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%.<\/p>\n Ratings agency Moody\u2019s has\u00a0previously anticipated debt levels will reach 68% of GDP by 2021.<\/p>\n
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