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<\/a><\/p>\nEven before the virus, increased spending to grow the government workforce and bail out state-owned companies such as Eskom Holdings SOC Ltd. conspired with below-target revenue and slow economic growth to boost debt. As a percentage of gross domestic product, it will peak in 2024 in the Treasury\u2019s best-case scenario.<\/p>\n
That\u2019s provided the government takes active steps to stabilize the trajectory and revive the economy.<\/p>\n
\u201cSouth Africa\u2019s debt position is going to be unsustainable over the next five years because the fiscal consolidation measures are unfeasible,\u201d said Mpho Molopyane, an economist at FirstRand Group Ltd\u2019s Rand Merchant Bank. \u201cTreasury won\u2019t be in a position to deliver.\u201d<\/p>\n
South Africa\u2019s debt-service costs probably rose to 4% of GDP in 2019-20, the highest since 2003, and will climb even further. The cost of servicing loans has been the fastest-growing expenditure item since 2011 and is crowding out money for development, including education and health.<\/p>\n The virus forced the ruling party to break its long-held resistance to borrowing from the International Monetary Fund, securing a $4.3 billion dollar emergency loan to bankroll part of a stimulus package announced by president Cyril Ramaphosa.<\/p>\n The Treasury may introduce a debt limit in the budget, a suggestion proposed by the IMF almost two years ago.<\/p>\n Talks with the World Bank may have an impasse after the government rejected initial conditions attached to the funds it seeks to borrow.<\/p>\n South Africa could exceed its domestic-funding requirements for the year after issuing debt at an \u201calarming pace\u201d to fund the budget deficit, said Mike van der Westhuizen, a portfolio manager at Citadel Investment Services. The strong take-up in domestic long-term loans is largely due to the Treasury doubling the limit on non-competitive auctions to 100%, he said.<\/p>\n That could give the Treasury the option of slowing the pace of domestic bond sales for the rest of the fiscal year, or continuing at the same rate to cover for a possible larger-than-expected revenue shortfall.<\/p>\n It lost its last investment-grade assessment at Moody\u2019s Investors Service in March, more than 25 years after it was first awarded. The downgrades raised borrowing costs and complicated efforts to narrow the budget gap.<\/p>\n<\/a><\/p>\n<\/a><\/p>\n<\/a><\/p>\n<\/a>
\nYields on the country\u2019s generic, rand-denominated 10-year debt have climbed since 2012, when South Africa began its march toward a full house of junk credit ratings.<\/p>\n