Finance Minister Tito Mboweni’s most crucial task when he presents the national budget on Wednesday is to spell out measures to rein in the country’s ballooning debt, Democratic Alliance (DA) finance spokesman Geordin Hill-Lewis said on Monday.
Hill-Lewis said the minister must address the immediate fiscal crisis created by the national debt burden, declining revenue, the mounting public wage bill and ongoing bailouts for embattled public enterprises.
“If this does not change in a very significant way, then South Africa will lose its only remaining investment-grade credit rating and will not avoid a solvency shock,” he said, referring to Moody’s upcoming review of South Africa’s sovereign credit rating.
Hill-Lewis said there was a clear gap between Mboweni’s stern warnings that South Africa was heading for a debt trap and that the public wage bill must be trimmed, and the actual reality of it growing.
“Despite the stern commitments in last year’s budgets, national debt, measured as net loan debt, is set to increase to a staggering R4.2 trillion, or 67.5 per cent of GDP by 2022/23. That is if there are no further revenue shortfalls, an increasingly unlikely outcome.
“Therefore, the only real important test of this budget’s credibility is the seriousness of the plans presented to rein in national debt, cut the public wage bill, and grow the economy. That is how we will judge the minister’s speech.”
Moody’s is the last of the big international ratings agencies to have maintained South Africa at investment grade.
In November it downgraded the outlook on the credit rating from stable to negative. This is the last step before stripping the country of its Baa3 long-term foreign-currency and local-currency issuer rating.
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