#MTBPS: SA's desperate fiscal slide continues

SA’s desperate fiscal slide continues

South Africa is on a slippery slope of a fiscal disaster.

Finance minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS) revealed a country on the verge of drowning in debt, with no clear plans to turn the ship around.

The most startling number in the MTBPS is that the government will have to borrow R553 billion PER YEAR over the next three years. This will result in total debt rising from R4.8 trillion to R6 trillion in the 2025/26 financial year. Over the same period, total interest payments will be R1.3 trillion, or 22c of every rand the government spends.

The reason is quite simple. The government cannot cut its expenditure to mirror the drop in tax revenue.

Godongwana said in his address that expenditure will be reduced by R21 billion. This represents a saving of 1% of the total expenditure budget of R2.04 trillion. It is inconsequential.

This means South Africa’s total debt-to-GDP ratio will swell to 77%. The ratio was only 23.5% in 2008.

There may be a lot of talk about austerity coming from Godongwana, but the numbers don’t support it.