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· The South African government’s efforts to stabilize its ballooning debt by 2023 will unlikely to meet the target, according to rating agency Moody’s.
· Even before the onset of the pandemic, the South African economy was in the grip of a severe recession.
The South African government’s efforts to stabilize its ballooning debt by 2023 will unlikely to meet the target, according to rating agency Moody’s. This is on account of the higher expenditure envisaged to respond to the pandemic. The supplementary budget introduced recently in response to the coronavirus crisis projected a wider budget deficit. Coupled with this, the nation has an already accumulated public debt, which forms a substantial part of the GDP of the country.
Also, even before the onset of the pandemic, the South African economy was in the grip of a severe recession. The lockdown that followed late in March has put further strain on businesses and consumers. Given South Africa’s weak track record of fiscal consolidation in recent years and the weak medium-term economic outlook, debt stabilization by 2023 will be very difficult to achieve, says the rating agency.
Presenting the supplementary budget recently, South African finance minister Tito Titus Mboweni, said that the economy was expected to contract by 7.2 per cent in 2020. This is the largest contraction in nearly 90 years. Inflation would likely register 3 per cent in 2020. Commodity price increases and a weaker oil price have softened the blow, but as a small open economy reliant on exports, South Africa has been hit hard by both the collapse in global trade and domestic recession.
The finance minister said that the gross tax revenue collected during the first two months of 2020-21 was R142 billion, compared to the initial forecast for the same period of R177.3 billion.
