Government debt to reach R5.84 trillion by 2026

Wednesday, February 22, 2023

Government’s gross debt stock is projected to increase from R4.73 trillion in 2022/23 to R5.84 trillion in 2025/26, says Finance Minister Enoch Godongwana.

“And because debt is high, our debt-service costs are also high,” Godongwana said while delivering the 2023 Budget at the Cape Town City Hall on Wednesday.

Government, he said, must consider its consolidated position, which includes debt-service costs.

South Africa’s consolidated fiscal deficit is projected at 4.2% of GDP for 2022/23, and this will reach 3.2% in 2025/26.

The figures include the impact of the partial take-over of Eskom debt, with Godongwana saying that government debt will stabilise at a higher level of 73.6% of GDP in 2025/26.

This is three years later than anticipated in the 2022 Medium Term Budget Policy Statement, he said.

Debt-service costs are projected to average R366.8 billion annually over the medium term, reaching R397.1 billion in 2025/26, Godongwana said, adding that these are resources that could otherwise be used to address pressing social needs or be invested in the country’s future.  

There are risks to the fiscal outlook, he said.

These, he said, include a worsening of the economic outlook, a further weakening of the finances of state-owned companies, and an unaffordable public-service wage agreement.

“If these risks materialise, they will require us to make difficult budgeting trade-offs.

For these reasons, South Africa must continue exercising fiscal restraint.

“Accordingly, government non-interest spending will be kept below the level of revenue into the future, and we will continue targeting the stabilisation of debt,” he said. 

The fiscal consolidation strategy government adopted several years ago has restrained growth mainly in consumption expenditure.

The strategy, Godongwana said, has also allowed the State to use part of higher-than-expected revenues to reduce the deficit.

“We are bringing the fiscal deficit down without resorting to tax increases or further cuts in the social wage and infrastructure. A primary fiscal surplus will be achieved in the current financial year, and this will be maintained over the medium term. This is a critical policy stance." –