Faced with Surging Debt, South Africa Sticks to Borrowing Plans

(Bloomberg) --

South African Finance Minister Tito Mboweni steered clear of increasing borrowing in his medium-term budget, instead announcing spending cuts to offset falling tax revenue.

The National Treasury’s financing plan unveiled Wednesday was little changed from the special adjustments budget announced in June to take account of the devastation wrought by the coronavirus.

The government will rely on borrowing from multilateral institutions and draw on sterilization deposits it holds with the South African Reserve Bank to help finance a budget deficit that’s seen at 15.7% of gross domestic product this year.

Here are the main points from the financing plan:

• The gross borrowing requirement -- the sum of the main budget deficit and maturing loans -- is expected to reach 774.7 billion rand ($47.4 billion) this fiscal year. That’s marginally down from 776.9 billion rand projected in June, but up from the 415.8 billion rand that was raised in the previous fiscal year. It’s seen declining to 593.2. billion rand by 2023-24.
• The Treasury expects to raise a net 143 billion rand in domestic short-term loans in the fiscal year through March, and an average of 66.7 billion rand annually over the next three years.
  • It intends raising 462.5 billion rand in domestic long-term loans this year, and an annual average of 469.9 billion rand over the following three years.
• Foreign loans totaling 121.8 billion rand are set to be raised this year, 49.4 billion rand in 2021-22 and 49.3 billion rand in the year after that.
  • Gross loan debt is expected to rise to 5.54 trillion rand, or 92.9% of gross domestic product, in 2023-24, from 3.97 trillion rand, or 81.8%, this fiscal year.
  • Debt-service costs are projected to increase to 353.1 billion rand in 2023-24, from 233 billion rand.

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